Financial markets are being overly pessimistic about the US outlook and may underestimate the chances of an interest-rate increase as soon as June, according to a senior Federal Reserve official.
Dennis Lockhart, the president of the Atlanta Fed, said recent inflation readings had been “encouraging” while early signs pointed to growth rebounding from a soft first quarter, meaning that June should be a possibility for a move.
The policymaker, who does not vote on the board this year, stressed that he had not made up his mind about whether the central bank should lift rates next month, as he gauges incoming data and risks such as the UK referendum on membership of the European Union.
But in an interview with the Financial Times, Mr Lockhart said: “The markets may be underestimating the degree of open mindedness,” about the option of a near-term increase.
He added: “If the data continue to be encouraging, I would certainly entertain some policy move in June. I don’t think June should be taken off the table. I am of the view — others, my colleagues have said this — that markets may be reading this more pessimistically than I am. The [market-implied] probability of a rate increase in June is quite low.”