Dennis Lockhart: “Amid deleveraging, the US can only grow by 2.5%”

Dennis Lockhart

“Since the recovery came about in the summer of 2009, the US have been growing, in spite of some ups and downs, at a 2,1% rate. My personal feeling is that this year growth is going to reach between 2% and 2.5%,” Atlanta Fed’s chairman Dennis Lockhart said Tuesday in Madrid, at a conference held by Areces Foundation.

“I could be wrong,” he added, “but that is my opinion. Why couldn’t we grow by a higher rate? Because people still are in the middle of a deleveraging process, which makes it near impossible that consumption takes off again. And because the financial system is still restructuring, and productivity growth has slowed down under the pressure of individual adjustments–now exhausted.”

According to Lockhart, whose speech tackled the challenges of growth and employment, “there is no silver bullet.” An efficient plan would be a mix of policies: “elimination of barriers like fiscal uncertainty, investing in growth policies like education and infrastructures, and a monetary policy that can generate favourable interest rates provided there’s no inflation threat.”

This could “speed up US growth and cut our official unemployment rate of 7.9%, a figure that excludes underoccupation–that is, people who work part-time and would like to move to full-time positions–or people who have left their jobs and don’t appear in the jobseeker lists.”

About the possibility that the Federal Reserve’s expansionary monetary policy cannot be stretched further, Lockhart admitted that “there is some truth in it, interest rates cannot be lower and yet, people stay away from borrowing. They are just busy trying to put their own house in order.” He sent a reassuring word to those who fear the Fed could spark new bubbles and future crisis, though. “There are no signs whatsoever that this is the case,” Lockhart said.

The Atlanta Fed’s president refused to comment on the price of the dollar–“it’s a matter for the markets”–, but was adamant to say that “a strong eurozone is beneficial for us, too.”

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