Fed’s Lockhart Says Premature to Consider Slower Bond Buying

Federal Reserve Bank of Atlanta President Dennis Lockhart said it’s too early for the central bank to consider reducing its pace of bond purchases following a weakening in the labor market last month.

“I do think too much focus on that at the moment is a bit premature,” Lockhart told reporters in Stone Mountain, Georgia. “I have emphasized I think we have to wait and watch the data come in and see how the economy evolves.”

Lockhart, who doesn’t vote on monetary policy this year, has supported the central bank’s monthly purchases of $85 billion in Treasuries and mortgage-backed securities as a means to try to bring down 7.6 percent unemployment. Fed officials are considering how quickly to slow purchases amid mixed signs for the labor market, with 88,000 jobs added in March in the smallest gain in nine months.

Minutes of the March 19-20 Federal Open Market Committee meeting released today show that a number of Fed officials said the central bank should begin tapering its bond buying program later this year and stop it by year end.

“It is possible the conditions will develop in the second half of the year or in early 2014 that will allow some measure of winding it down,” Lockhart told reporters during an Atlanta Fed conference focusing on financial regulation.

Jobs Report

Lockhart said the “disappointing” jobs report doesn’t change his outlook for growth this year between 2 percent and 2.5 percent. The report will be revised and a single month doesn’t change the underlying trend, he said.

Still, the Atlanta Fed leader said he was concerned that the sharp decline in the unemployment rate has been driven in part by people dropping out of the U.S. labor force, with many of them leaving because they are discouraged about their prospects.

“There is some false comfort you get when the unemployment rate is dropping because of people who are bailing out of the workforce,” he said. Labor force participation is “close to an all-time low” and “obviously that is a concern.”

Lockhart also said an increase in asset purchases can’t be ruled out as an option if the economy were to worsen.

“I wouldn’t take any option off the table,” he said. “If we were hit with a significant economic shock and we were looking at recession or worse, I think monetary authorities of the country would have to consider what can we do about that.”

A former Georgetown University professor, Lockhart has led the Atlanta Fed since 2007. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.

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