Lockhart Says Fed’s Bond Portfolio May Lose Value as Rates Rise

Federal Reserve Bank of Atlanta President Dennis Lockhart said that “there is always the prospect the Fed would take losses in the market value of the bonds” in its portfolio in an interest-rate increase.

“I’m comfortable that under most plausible scenarios those are manageable,” Lockhart told reporters in New York today at the Bloomberg Global Markets Summit hosted by Bloomberg Link. “Remittances to the Treasury might have to go down for a couple years but it is a manageable process in the interests of normalization.”

Earlier, during a forum discussion at the summit, Lockhart said he is asked by average Americans whether “this long period of low interest rates, isn’t it hurting people pretty dramatically and by extension might hurt holders of bonds at some stage?”

“The best answer I can give is that the low-rate policy is designed to bring the economy back to life, to nurture a recovery, to get the economy growing,” Lockhart said.

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