Tags: Fed | Easing | Jobs | lockhart

Lockhart: More Fed Easing May Be Needed if Jobs Market Stalls

Friday, 21 Sep 2012 05:26 PM

Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank may ease beyond its current plan to buy mortgage-backed securities if the labor market doesn’t show signs of greater strength.

“MBS purchases will continue until we see a better employment situation,” Lockhart said in a speech in Atlanta. “If we do not see improvement, more action may be taken. And inflation will be monitored closely and kept near 2 percent.”

Lockhart, who votes on monetary policy this year, supported the Federal Open Market Committee’s Sept. 13 decision to expand its holdings of securities with open-ended purchases of $40 billion in mortgage debt each month. The Fed, led by Chairman Ben S. Bernanke, aims through a third round of quantitative easing to boost growth and reduce 8.1 percent unemployment.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

“I hope the resolve of the FOMC is clear,” Lockhart said in a speech to the Atlanta Institute of Internal Auditors. “A stronger overall pace of recovery is central to improvement in the labor market.” The committee needed to act because of “discouraging conditions of slowing growth and still high unemployment with meager recent progress in bringing it down.”

In addition to undertaking QE3, the Fed said last week that economic conditions would likely warrant holding the target interest rate near zero through at least mid-2015, extending a previous date of late 2014. The Fed said low interest rates will remain appropriate for a “considerable time” after growth strengthens.

Not Enough

Lockhart said the economy has been expanding at a rate of less than 2 percent lately, not enough to reduce unemployment significantly. Gross domestic product climbed by 1.7 percent in the second quarter, down from 2 percent in the first quarter and 4.1 percent in the fourth quarter of last year.

The Atlanta Fed official said the choice of mortgage- backed-securities was well timed because the housing market is starting to show improvement.

“By maintaining downward pressure on mortgage rates and by encouraging growth of mortgage-financed purchase activity, sales activity in the Southeast and nationwide should accelerate, and upward pressure on home prices should contribute to consumer confidence,” he said. “The policy action should have positive sector-specific effects with spillover to general conditions.”

Some “headwinds” remain, Lockhart said, including the European debt crisis and the so-called fiscal cliff, the $600 billion of tax increases and spending cuts that will kick in automatically at the end of the year unless Congress acts.

The Congressional Budget Office said in an Aug. 22 economic report that fiscal tightening of that magnitude could cause a recession.

Lockhart, a former Georgetown University professor, has led the Atlanta Fed since 2007. The regional bank is responsible for Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

© Copyright 2017 Bloomberg News. All rights reserved.

 
1Like our page
2Share
StreetTalk
Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank may ease beyond its current plan to buy mortgage-backed securities if the labor market doesn't show signs of greater strength.
Fed,Easing,Jobs,lockhart
482
2012-26-21
Friday, 21 Sep 2012 05:26 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved