The sluggish economic recovery should gain speed in the second half of 2011 and perform better than many now expect, a leading central banker told a Chattanooga investment group Tuesday night.
Dennis Lockhart, the president of the Federal Reserve Bank of Atlanta, told the CFA Society of East Tennessee that he doesn't expect the economy to sour into another recession unless there is an economic crisis in Europe or a fiscal stalemate in Congress.
"We see a slowly growing economy and there is a chance of that growth accelerating," Lockhart told the group.
Lockhart conceded that Fed officials were surprised by the lackluster pace of the recovery during the first quarter of the year. The Fed's easy monetary policy produced only an anemic 0.4 percent growth in the nation's economy.
But the Atlanta Fed president said "recent economic data are mostly directionally positive and have mostly exceeded expectations." Lockhart cautioned his Chattanooga audience of bankers and chartered financial analysts not to bank on "pockets of pessimism" that could prove self-fulfilling.
"Let's not talk ourselves into believing that enduring weakness or recession is inevitable," he said.
Nonetheless, Lockhart said he expects economic growth pace of 2.5 percent or less will not quickly lower the U.S. unemployment rate, which has remained at or above 9 percent for 30 consecutive months.
"The real picture is a low and slow growth," he said.
Lockhart blamed the sluggish pace of the economy to uncertainty fueled by unprecedented fiscal challenges in the United States and sovereign debt problems in Europe.
Such challenges have led the Federal Reserve to take unprecedented steps to signal that interest rates will be kept low through 2013 and to expand its own balance sheet to boost the money supply.
The Federal Reserve System has come under increased congressional and public criticism for its efforts to jumpstart the economy. The leading Republican presidential candidates have all said they want to replace Federal Reserve Chairman Ben Bernanke, claiming the central bank is risking inflation.
Lockhart, who next year will become one of the 12 voting members of the Fed panel that sets monetary policy for the U.S. government, defended the Fed's accommodative monetary policy and the actions of Fed Chairman Ben Bernanke.
"We're in a more politicized environment where there is more criticism of the Fed and its chairman," he said. "But I don't think those criticisms, especially of Chairman Bernanke, are evenly remotely justified."