Atlanta Fed President Lockhart remained generally confident in US fundamentals in his speech to the Rocky Mountain Economic Summit, but patience was required on monetary policy until the picture clarified and Fed officials are making no attempt to talk up the potential for a near-term rate increase.
Overall US demand was holding up well and consumer fundamentals remained sound with growth in personal consumption and auto sales remain strong, although with some concerns that current levels may be difficult to sustain.
The June employment report was strong and quite broadly based with many of the negative signals seen in the May report reversing.
Business investment remained subdued, but the export performance had improved. Overall he expected continued growth at around 2% per annum and for inflation to move closer to the 2% inflation target.
He expected the overall UK referendum impact on the US economy to be negligible in the short term, although it had clouded the waters. In this context, he saw little choice but to exercise patience and let the picture clarify, especially as there could be economic headwinds over the medium term.
It was also too early to sound the all clear on financial-market stability according to Lockhart, although there was no evidence so far of any serious damage.
Uncertainty was an important underlying factor, expressed both in the performance of the UK labour market and implications of the UK Brexit vote.
Overall he was confident that the Federal Reserve was not behind and comfortable with the cautious and patient approach to policy in the near term.
Market reaction was limited with US Treasury future continuing to recover from early lows, but still down around 30 ticks on the day with the dollar little changed.