Fed's Oakley sees 'definite upside' to U.S. economy

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  • | 12:00 p.m. April 19, 2013
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Just like the previous couple of years, officials of the Federal Reserve Board entered 2013 with "a decent level of optimism and confidence," according to Chris Oakley, vice president and regional executive of the Jacksonville Branch of the Federal Reserve Bank of Atlanta.

However, unlike the previous two years when growth remained slow, the Fed is hoping to see the economy pick up in 2013, Oakley told the North Florida chapter of the Association for Corporate Growth.

"We feel there is some definite upside as the year continues," Oakley said Thursday at the meeting at The River Club.

"We think it might be different. Obviously time will tell," he said.

The Atlanta Fed is one of 12 regional banks of the Federal Reserve System across the country. The Atlanta bank has five regional branches, including Jacksonville.

In his role, Oakley meets with business people for their input on the state of the economy, which he passes on to Dennis Lockhart, president of the Atlanta Fed.

"My role is to serve as liaison between Main Street and Dennis Lockhart," he said.

Lockhart uses that information when he meets eight times a year with the 11 other regional presidents and the seven Federal Reserve Board governors to determine the nation's monetary policy.

While Fed officials look at a lot of economic data, they also rely on the anecdotal information provided by Oakley and other regional Fed executives. That information is painting a better picture these days, Oakley said.

"We are getting increasingly positive noise from those contacts," he said.

"Our outlook calls for continued moderate growth."

Among the positive signals are indications that businesses that have been sitting on cash are beginning to deploy their capital.

"I don't want to oversell that," he said, "but there is movement there."

The Fed also is seeing some positive signs in the housing sector.

"I predict that is going to continue to be bumpy," Oakley said. However, "by and large we seem to be through the worst of that."

He said the nation's 7.6 percent unemployment rate continues to be a concern for the Fed. The stated jobless rate doesn't account for factors such as underemployment and people out of the labor force, who are not counted as unemployed. So the Fed is trying to get a handle on the overall employment situation.

"We closely watch the underlying things going on," Oakley said.

The Fed plans to keep interest rates low as long as the unemployment rate remains above 6.5 percent, he said.

Data from the Atlanta Fed projects that the economy would have to create more than 280,000 jobs a month to lower the unemployment rate to 6.5 percent by the end of this year.

If it only creates about 150,000 a month, the jobless rate won't fall to that rate until 2015.

The Fed's current policy also is dependent on inflation remaining "well-behaved," Oakley said.

A survey of business people conducted by the Atlanta Fed projects inflation at 1.9 percent over the next 12 months.

The Fed's current effort to keep interest rates low is commonly called QE3, meaning it is the Fed's third round of "quantitative easing." That's not the actual name for the policy.

"We call it large-scale asset purchases," Oakley said.

But then he admitted, with a chuckle, "we actually call it QE3, but we're not supposed to say that."

Overall, the Fed is expecting economic growth "at something north of 2 percent this year," Oakley said.

"We are seeing progress. It's just frustratingly slow," he said.

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