Fed Policymakers Keep December Rate Hike in Spotlight

Fed Bank Of Atlanta Conference On Federal Reserve: Past and Present
Stephen Morton/Bloomberg via Getty ImagesRichard Fisher, president and CEO of the Federal Reserve Bank of Dallas, left, and Dennis Lockhart, president and CEO of the Federal Reserve Bank of Atlanta at a conference in Georgia in 2010.

By Ann Saphir and Lindsay Dunsmuir

CHICAGO and ORLANDO, Fla. -- Two Federal Reserve policymakers whose views are often at odds both suggested Monday they could well support an interest rate hike in December, as long as the economic data don't disappoint and that rate hikes once begun are gradual.

While two doesn't make a crowd, their apparent agreement on the plausibility of a December rate increase came just a day after Fed Vice Chair Stanley Fischer said he, too, expects a 2015 hike.

%VIRTUAL-WSSCourseInline-876%Indeed a large majority of Fed officials believe it will be appropriate to raise rates this year, but after the Fed opted to keep rates near zero at their meeting last month, investors have been increasingly doubtful. Weaker-than-expected data on job creation since the Fed's most recent meeting has fueled their skepticism, along with few signs that the global economy is poised to pick up.

Traders see about a 40 percent chance the Fed will hike in December, and give about even odds for the January meeting. For October they see a less than 1 in 10 chance, though both Dennis Lockhart, the centrist chief of the Atlanta Fed, and Chicago Fed president Charles Evans, whose views are more dovish, sought to keep even October in the market's sights.

"I think October is a live meeting, clearly there is the potential that the data coming in, in advance of the October meeting will be sufficient we have a lot more in December," Lockhart said in Orlando, Florida.

Speaking separately in Chicago, Evans said that while for him waiting until mid-2016 to raise rates would be the "best choice," doing so earlier wouldn't necessarily adversely affect his forecast for the economy.

"There is wiggle room" on the timing of the rate hike, he told reporters after a speech, and the economy could probably even withstand a slightly steeper set of rate increases than he, personally, would view as optimal.

It is "way too early," he said, to know whether a December rate hike, or even an October one, would be appropriate.

The Fed next meets Oct. 27-28.