Tags: Fed | Lockhart | taper | stimulus

Fed's Lockhart: Economy Would Have to Move Sharply to Alter Tapering

Tuesday, 13 May 2014 09:48 AM

Economic conditions in the United States would have to shift suddenly for the Federal Reserve to alter the tapering of its money-printing program, said Dennis Lockhart, president of the central bank's Atlanta branch.

"It would take a rather dramatic change" to adjust the slowing of the central bank's monthly bond purchases, he said in a speech in Riyadh, Saudi Arabia.

Echoing other comments by Fed officials, Lockhart said the Fed would be likely to use a broader mix of policy tools in future, relying less heavily on the overnight federal funds rate.

Lockhart, who said he was speaking in his personal capacity, does not have a vote this year on the Fed's policy-setting board but he participates in its discussions and is considered to be near the center of its policy spectrum.

The Fed began scaling back its bond-buying program, aimed at pushing down borrowing costs, in recent months amid signs of an improved jobs market.

It is currently buying $45 billion a month, a figure Lockhart said on Sunday in a speech in Dubai should fall to zero by the central bank's October or December meeting.

The Fed introduced the bond purchases as an extra stimulus on top of ultra-low overnight interest rates, which it has kept near zero since late 2008 to help the U.S. economy recover from a deep recession.

The central bank's primary tool for conducting monetary policy, the Fed funds rate, measures the interest at which commercial banks lend money parked at the Fed to each other.

Lockhart told reporters that while the Fed funds rate still had a role in the policy mix, it might not be as dominant in future.

"There are some longer-term policy tools like term repos, term reverse repos and term deposits, so we would neutralize excess reserves by paying a little bit more to a bank to effectively sideline their reserves for a period of time," he said.

© 2020 Thomson/Reuters. All rights reserved.


   
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Economic conditions in the United States would have to shift suddenly for the Federal Reserve to alter the tapering of its money-printing program, said Dennis Lockhart, president of the central bank's Atlanta branch.
Fed, Lockhart, taper, stimulus
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2014-48-13
Tuesday, 13 May 2014 09:48 AM
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