Fed's Lockhart says world will feel U.S. slowdown

By Matthew Bigg

ATLANTA (Reuters) - U.S. exports have been helped by a weaker dollar and this is providing a boost to an otherwise weak economy, Federal Reserve Bank of Atlanta President Dennis Lockhart said on Saturday.

"The U.S. dollar has depreciated against the euro and on a trade-weighted basis. The export sector of the U.S. economy has benefited and remains quite strong. Export growth has diluted - but not offset - the negative trend of the U.S. economy," he said in a speech.

"In recent weeks we have seen some rebound of the dollar and I think that's welcome," he said in a question and answer session that followed the speech to the Southern Center for International Studies Young Professionals in Atlanta.

The dollar is the dominant world currency and represents a high percentage of global reserves.

"My expectation is that although there will be some gradual diversification into other currencies the dollar will remain the dominant currency and certainly a very prominent currency going forward," he said.

The dollar has slipped to record lows against the euro and other major currencies this year as the Fed slashed interest rates to offset the fallout from a housing crisis that has chilled growth. Its benchmark overnight funds rate has been lowered since September to 2 percent from 5.25 percent.

"The U.S. economy is in the midst of a pronounced slowdown, with very little growth recorded for two consecutive quarters. The weakness was initially centered in the housing sector but has become more widespread," Lockhart said.

He also described inflation as "elevated" due in part to higher energy and commodity prices.