Fed’s Lockhart Says Fed Can’t Rule Out QE Tapering Next Month

Federal Reserve Bank of Atlanta President Dennis Lockhart
Federal Reserve Bank of Atlanta President Dennis Lockhart. Photographer: Scott Eells/Bloomberg

Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank will consider reducing its bond-buying program at next month’s policy meeting.

“I would not take off the table at least consideration at that time,” Lockhart told reporters in Oxford, Mississippi, in response to a question on tapering in December. “The question of changing the mix of accommodative tools ought to be on the table at every meeting for the foreseeable future.”

The Federal Open Market Committee last week voted to continue its monthly bond purchases at a pace of $85 billion, saying it needs more evidence the economy has improved following a partial U.S. government shutdown. The economy added 204,000 jobs last month and the unemployment rate rose, the Labor Department reported today.

“It is an encouraging number,” Lockhart told reporters after speaking to the University of Mississippi’s banking and finance symposium. Still, “I would be reticent to draw very profound conclusions to one month’s positive jobs number.”

Lockhart said the Fed’s tools include both asset purchases and communications, or “forward guidance” of plans for interest rates and how they would be affected by “thresholds” such as the unemployment rate.

The Fed won’t reduce its bond purchases until March, according to the median estimate of economists surveyed by Bloomberg on Oct. 17-18 after the shutdown. Economists had initially expected a tapering of so-called quantitative easing in September.

“If we find the employment data to be convincing, that job growth is going to be sustained, that will certainly advance the time in which it would be appropriate to possibly pull back on asset purchases,” he said.

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