Tags: Fed’s Lockhart US Jobless Rate Is Unacceptable

Fed’s Lockhart: US Jobless Rate Is Unacceptable

Monday, 31 Jan 2011 02:19 PM

Federal Reserve Bank of Atlanta President Dennis Lockhart said policy makers should continue with record monetary stimulus and try to bring down unemployment that’s persisting at an unacceptably high level.

“There are definitely hopeful signs of sustained recovery in 2011,” Lockhart said today in the text of a speech in Miami. “That said, I believe it is a bit early to declare victory, and, to be sure, employment is nowhere near acceptable levels.”

The Fed last week reaffirmed its plan to buy $600 billion in Treasurys through June, pressing on with stimulus aimed at reducing the 9.4 percent unemployment rate and keeping inflation from slowing. Chairman Ben S. Bernanke is trying to boost growth after near-zero interest rates and $1.7 trillion in securities purchases helped pull the economy out of recession without bringing down joblessness from close to a 26-year high.

The U.S. economy expanded at a 3.2 percent annual rate in the fourth quarter as consumer spending climbed the most in more than four years, figures from the Commerce Department showed on Jan. 28. The Institute for Supply Management-Chicago Inc. said today that businesses in the U.S. expanded more than forecast in January and at the fastest pace since July 1988.

“Progress is real, but fitful, and support of accommodative Fed policy is still required,” Lockhart said to Miami Dade College students. “The appropriate outlook at this juncture is one of cautious optimism, avoiding overstatement of the likely speed of improvement.”

‘Extended Period’

Lockhart, in response to students’ questions, said the central bank was unlikely to raise rates from near zero soon.

“The conditions in the economy justify this level of low rates for an extended period of time,” he said, citing Fed statements. “We continue to say that.”

Lockhart, a former banker, also said the U.S. financial system has made “a great deal of progress” from the financial crisis, with many banks raising capital and writing off problem loans.

“Broadly speaking, the banking system has improved itself but still has a ways to go before it is fully healthy,” he said.

The Atlanta Fed chief said the moderate economic expansion has momentum and should be sustainable this year.

Even so, Lockhart said housing could be a drag on the recovery, especially in Florida. South Florida has been among the centers of the housing bust, with Miami’s home prices falling 40 percent in three years, according to the S&P/Case- Shiller home price indexes.

U.S. residential real-estate prices dropped in November by the most in a year, signaling housing hasn’t joined the expansion.

‘Concern Has Abated’

“Inflation is currently measured at lower-than-desired rates,” Lockhart said. “A few months ago, fear of deflation was justified, but recently this concern has abated and the rate of inflation seems to have stabilized.”

The Fed’s preferred price index, which excludes food and fuel, was up 0.7 percent from a year earlier in December. Fed policy makers have a long-run goal of 1.6 percent to 2 percent inflation they see as consistent with achieving legislative mandates for maximum employment and stable prices.

Lockhart, 63, a former Georgetown University professor, has led the Atlanta Fed since 2007. Fed presidents rotate voting on monetary policy with Lockhart next voting in 2012.

The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.

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Federal Reserve Bank of Atlanta President Dennis Lockhart said policy makers should continue with record monetary stimulus and try to bring down unemployment that s persisting at an unacceptably high level. There are definitely hopeful signs of sustained recovery in 2011,...
Fed’s Lockhart US Jobless Rate Is Unacceptable
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2011-19-31
 

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