Dennis Lockhart does not hesitate or equivocate when I ask him what he expects the Federal Reserve’s policy making FOMC - Federal Open Market Committee - to do when it wraps up its final meeting of 2024 this week.
”I think it will be a meeting with some pretty active discussion of two options,” says the former president of the Federal Reserve Bank of Atlanta.
”One would be to go ahead with the cut, and the second would be to pause or to skip at this point. On balance, I think they will perform the cut as they had signaled in September,” Dennis says.
“And probably the more important aspect of tomorrow's proceedings will be the the way Jay Powell positions the policy path and positions the decision to cut in” he adds.
”But they will then kind of position policy as much more tactical in 2025… I think the right thing to do is to get the cut done. 100 basis points is, I think, a significant recalibration.”
Here are more of the issues we discuss.
Pinning down the neutral rate 00:05:23:22 - 00:05:55:24
…This is a debate that may not matter that much in 2025, because I think as they enter 2025, they correctly cannot anticipate the administration's policies and the effect on the economy. But at the same time, those policies could come on very, very quickly and have a shock like effect.
Lockhart on 2025 Dots, expected rate cuts 00:07:53:13 - 00:08:21:23
I would expect for 2025 is maybe a median of three. So I'm holding with there for just deciding not to revise their outlook. But some also perhaps arguing that the committee should really back off the four cuts to something like two. And that would leave you with a median conceivably of three. That's what I'm expecting.
Won’t be surprised by one or two December policy dissents 00:12:05:01 - 00:12:29:10
I know Jay Powell has a complete respect of his committee, so Powell says, Well, on balance, I think we should go ahead and do the cut. It will happen. And there could be a dissent or two. If there are more than two dissents, then I would be concerned that you have a committee that's that's, you know, not very well not hanging together very well.
Could Powell Signal Fed headed for January skip? 00:13:57:03 - 00:14:26:14
Well, first, I would expect the January meeting to be a skip conceivably morphing into a pause depending how things develop….. 00:14:26:16 - 00:14:52:08 Having said that, it's very rare for the committee to signal much about the next meeting
Lockhart on Deportations 00:18:53:00 - 00:19:30:13
Those industries first order effect could be that they're scrambling for or for personnel, and if they are, they may have to compete by raising wages and that kind of flow through to product prices. But you know what's really hard for me to figure out is there's an inflationary impulse. And at the same time, it's such a shock to the economy with people scrambling that it may be a deflationary or disinflationary impulse at the same time.
December could be the end of uncertainty- 00:21:08:01 - 00:21:45:22
This could be the last meeting where the rhetoric of a wait, wait and see what happens is applicable. Because by January, if these are day one kinds of policy implementation, you know, we might know a great deal more by the January meeting of what the intended policy is and how it's going to be implemented. We may not know, but certainly by the next two meetings, that picture should be clarified to a great extent, I think.
Lockhart still sees a commitment to 2% 00:24:16:13 - 00:24:47:05
I think the projections will show that that is a medium term goal. But very importantly, I don't think market practitioners and the public should doubt their commitment to get get to 2% and to get inflation down to their definition of price stability.
Lockhart on the new Framework - 00:27:30:18 - 00:28:04:09
… I think they're going to have to address the experience of the last three years, four years, and that suggests to me there could be substantial revisions. I think the last version was too much influenced by the history from 2009 through 2019.
So dive in, see and hear what Dennis says about all of this more. This is not just about the Fed’s December decision: it’s about the Powell-led Fed opening the door to next year’s policy path as they brace of the Trump-led administration to hit the ground running with major policy changes come January 20.
Dennis P. Lockhart became the fourteenth president and chief executive officer of the Federal Reserve Bank of Atlanta on March 1, 2007. He retired on February 28, 2017.
Lockhart was born in Bakersfield, California. He attended Stanford University and earned a bachelor’s degree in political science and economics in 1968. In 1971, he earned a master’s degree in international economics and American foreign policy from the Johns Hopkins University School of Advanced International Studies. He also attended the Senior Executive Program at MIT’s Sloan School of Management in 1994. He served as an officer in the US Marine Corps Reserve from 1968 to 1974.
Lockhart started his career with Citicorp/Citibank (now Citigroup). From 1971 to 1978, he held various international positions in Saudi Arabia, Greece, and Iran. From 1978 to 1986, he was senior corporate officer of the Southeast office of Citibank in Atlanta. From 1987 to 1988, Lockhart was head of the firm's Latin American debt-to-equity swap investment program, designed to restructure sovereign debt.
From 1988 to 2001, Lockhart worked at Heller Financial, where he served as president of Heller International Group, which had activities in commercial banking, finance and merchant banking in North and South America, Europe and Asia. From 2001 to 2003, he was managing partner at Zephyr Management LP, a private equity firm based in New York with activity in Africa and Latin America.From 2003 to 2007, Lockhart served on the faculty of Georgetown University's Walsh School of Foreign Service, teaching in the master's program. In this role, he was chairman of the program's concentrations in international business-government relations and global commerce and finance. He also was an adjunct professor at Johns Hopkins University's Nitze School of Advanced International Studies.
Before joining the Atlanta Fed, Lockhart served as a member of the boards of directors of several companies, including CapitalSource Inc., Tri-Valley Corp., and Greenfield Holdings Credit Ltd. He was also chairman of the Small Enterprise Assistance Funds. He served on the Advisory Committee of the US Export-Import Bank and chaired the committee in 2000.
Currently, Lockhart serves on the board of directors of the Metro Atlanta Chamber of Commerce and St. Joseph's Health System. He is a trustee of Agnes Scott College and the Atlanta International School. He also chairs the World Affairs Council of Atlanta and the Midtown Alliance.
During Lockhart’s tenure, the Federal Reserve faced some of the most traumatic economic events since the Great Depression of the 1930s, including the financial crisis and Great Recession. Lockhart has given many speeches on the financial crisis, monetary policy, and the economy.
Under Lockhart’s stewardship, the Atlanta Fed has won several awards. It was voted one of America’s Top Workplaces by Workplace Dynamics in 2013. In 2012 the Atlanta Journal-Constitution ranked the Atlanta Fed number nine in the large-company category as one of the top workplaces in Atlanta.
Written by the Federal Reserve Bank of Atlanta.
Share this post