Global risks including a slowdown in China and continued low oil prices are now the chief risks to what is an otherwise promising outlook for the U.S. economy, Atlanta Federal Reserve Bank President Dennis Lockhart said on Monday.
Lockhart told the Rotary Club of Atlanta he remains "mildly optimistic" that strong domestic consumption will help spur GDP growth of as much as 2.5 percent this year, enough to push the economy to full employment and move prices towards the U.S. central bank's 2 percent inflation target.
"The downside risks relate mostly to the influence of the rest of the world on our economy," Lockhart said, citing the recent global selloff in equity markets that was sparked by concerns over China's economy and, he said, compounded by tensions in the Persian Gulf and North Korea.
Despite those concerns, Lockhart said he expects U.S. households and businesses to spend at a strong enough pace to sustain the economic recovery and allow the Fed to continue raising interest rates over the course of the year.
"The behavior of inflation will be a key focus," Lockhart said. Though Fed officials have said they are confident inflation will increase once the price of oil stabilizes and the U.S. dollar stops rising, the speed with which that happens will be central to policymakers' discussion.
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