TAMPA — A Federal Reserve banker on Wednesday said a possible rise in mortgage rates stemming from Fed actions shouldn’t prove fatal to the housing recovery.
That was one of the insights provided by Dennis Lockhart, president and chief executive of the Federal Reserve Bank of Atlanta, who stopped by the Tribune after meeting with bankers in Tampa. Florida is part of the Federal Reserve’s Atlanta region.
Lockhart is cautiously optimistic about the economy overall, expecting continued slow growth in hiring and the gross domestic product.
“The economic data we see is rather mixed, does not paint a red-light, green-light picture,” he said.
The financial world will be watching on Sept. 18 for a gathering of the Federal Open Market Committee - a 12-member Federal Reserve body that sets key interest rates. Lockhart will attend the meeting, but won’t actually vote. Regional bank presidents such as Lockhart take turns on the committee, and it’s the Atlanta bank’s year to sit out.
Still, he’ll take part in the committee’s discussions and could affect its direction.
The housing industry is especially interested in September’s meeting, because the FOMC might cut back its purchasing of $85 billion a month in mortgage-backed securities and U.S. Treasury bonds. This purchasing has kept mortgage rates at historic lows. Mortgage rates have risen lately by a full percentage point and are being partly blamed for a steep 13.4-percent drop in new home sales last month.
Lockhart on Wednesday said he would “seriously consider an initial step” in reducing the Federal Reserve’s bond buying. That could change if the crisis in the Middle East escalates and affects oil prices, or if battles over the debt ceiling and other fiscal issues in Washington cause a “spectacle of dysfunction.”
He sounded confident in the housing market on Wednesday.
“I believe that the housing recovery will continue,” Lockhart said.
Aside from housing, Lockhart said he expects hiring to keep rolling along at about the pace it has been, a less-than-stellar 170,000 to 200,000 jobs per month.
The country is mired in a “barbell” labor market right now, with many low-skill, low-income jobs on one end and many high-skill, high-wage jobs on the other. Unfortunately, the mass of middle-income jobs have diminished because of automation of business functions and other reasons, he said.