Fed’s Lockhart Says ‘Slow’ Jobs Progress Justifies Weighing More Actions
Federal Reserve Bank of Atlanta President Dennis Lockhart said he sees the economy improving this year as he withholds judgment on whether the central bank should increase accommodation.
“The Atlanta Fed’s outlook anticipates a moderate pace of improvement but real progress on most fronts,” Lockhart said today in a speech in Atlanta. He said later to reporters that he is “open-minded” about the need for more stimulus.
Some officials on the Federal Open Market Committee have called for efforts to boost the economy even as the unemployment rate fell last month to the lowest level in nearly three years. New York Fed President William C. Dudley said last week that “additional housing policy interventions” can help boost growth, and the Fed should consider further easing. Boston Fed President Eric Rosengren said he supported the purchase of mortgage-backed securities.
Lockhart, who becomes a voting member of the FOMC this year, said that “steady even if unspectacular growth accompanied by inflation in the neighborhood of 2 percent justifies some reluctance to change, in either direction, the FOMC’s accommodative policy.”
“At the same time, I think slow progress toward full employment justifies continuing consideration of whether more can and should be done,” Lockhart said. “So for me as a policy maker, now is not a time to lock into a rigid position.”
The unemployment rate fell to 8.5 percent in December, down from 9 percent in September and 9.4 percent in December of 2010. The economy added 200,000 jobs, surpassing the estimates of economists who expected 155,000 jobs last month, according to the median of a Bloomberg survey.
Lockhart said to reporters he hasn’t ruled out the option of more Fed asset purchases while expressing doubt the move would do much to spur economic growth. Another round of so- called quantitative easing may not be “highly effective,” he said, adding “I’m not closing out the option.”
The Fed next meets in Washington on Jan. 24-25. At the meeting, governors and the regional-bank presidents will present their projections for the Fed’s target interest rate for the first time. The central bank lowered its benchmark federal funds rate to a range of zero to 0.25 percent in December 2008.
“Good communication can be a form of stimulus,” Lockhart said in response to an audience question. “We are putting a lot of effort into our communication with the public.”
The Standard & Poor’s 500 Index rose 0.2 percent to 1,280.80 at 2:29 p.m. in New York.
Lockhart said he foresees “modest” growth in gross domestic product this year of 2.5 percent to 3 percent “if there are no surprises from Europe or elsewhere.”
“It appears the fourth quarter is quite strong,” he said to reporters. “I would be surprised if there isn’t some retrenchment in the first quarter.”
The economy grew at a 1.8 percent pace in the third quarter of 2011, after expanding at a 0.4 percent rate in the first quarter and 1.3 percent in the second.
“We see inflation continuing to perform in an acceptable range in the coming year,” Lockhart said. He said the decline in unemployment “will continue but at a slow pace.”
Lockhart, 64, 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.
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