Federal Reserve Bank of Atlanta President Dennis Lockhart said concern over inflation exceeding the central bank’s 2 percent goal weighs against consideration of providing additional stimulus to reduce unemployment.
“The Fed’s already done a lot to support the recovery,” Lockhart said today in the text of a speech in Santa Barbara, California. “Whether additional monetary policy actions should be used at this time to try to speed things up has to be balanced against the risks to the Fed’s price stability objective that could accompany an overestimating of the amount of economic slack.”
Lockhart, along with the presidents of Fed district banks in San Francisco, Richmond and Philadelphia, said this week more accommodation probably won’t be needed. A decline of weekly jobless claims to a one-month low eased concern the job market is deteriorating. The number of applications fell by 27,000 to 365,000 in the week ended April 28, Labor Department figures showed today in Washington.
The Federal Open Market Committee left policy unchanged after its April 24-25 meeting, and Chairman Ben S. Bernanke signaled that further easing is unlikely unless the economy unexpectedly deteriorates.
Bernanke said it would be “reckless” to pursue policies that would drive up inflation when it’s already near the Fed’s target, while noting he’s “prepared to do more” should conditions worsen.
Inflation is “a little elevated due to a run-up in gasoline prices earlier in the year” though public expectations are “well anchored,” Lockhart said as part of an economic forecasting panel hosted by the University of California, Santa Barbara. Prices will probably “move back toward the 2 percent inflation rate over the course of the year,” he said.
The Fed in January set an explicit inflation target of 2 percent and Lockhart said price gains should be “close to 2 percent over time,” with “some flexibility” because inflation can be volatile from month to month.
The Atlanta Fed leader also said part of the employment weakness during the expansion since 2009 has been caused by a mismatch of worker skills with jobs.
Lockhart, 65, a former Georgetown University professor, has led the Atlanta Fed since 2007. Fed presidents rotate voting on monetary policy, with Lockhart voting this year. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.