Tags: Fed | Lockhart | Higher | Bond | Yields | Growth | Expected

Fed's Lockhart: Higher Bond Yields Show Growth Expected

Thursday, 10 Feb 2011 02:54 PM

Federal Reserve Bank of Atlanta President Dennis Lockhart said a rise in Treasury yields since the start of central bank bond purchases in November indicates growing confidence the U.S. recovery will gain strength.

“There was a view shared by officials in some places that rates would come down as a result of purchases of assets,” Lockhart said in Atlanta in response to audience questions after a recent speech. “I interpret that as improving confidence in the direction of the economy.”

Increasing growth means the Fed probably won’t need to buy more bonds after finishing its $600 billion program of purchasing Treasury securities in June, Lockhart told reporters after his speech. Chairman Ben S. Bernanke told the House Budget Committee on Wednesday that declines in the U.S. jobless rate in December and January “do provide some grounds for optimism.”

The 10-year Treasury’s yield fell Wednesday in New York trading to 3.674 percent from 3.74 percent. It has risen from 2.57 percent on Nov. 3, when the Fed announced it intends to purchase $600 billion in Treasury securities through June.

“If I take my base-case forecast, which continues the moderate rate of growth through 2011 and for 2012, I am not sure it would be necessary” for the Fed to make more purchases, Lockhart said. “On my base case, it would not be necessary.”

Lockhart told reporters that he expects U.S. economic growth to range from 3 percent to 4 percent this year.

Greater Job Creation

“At the current level of job creation, we are unlikely to make a great deal of progress” in reducing unemployment, he said. “We have to see greater job creation.”

Employers added 36,000 workers last month, the smallest gain since September, as winter weather depressed payrolls, figures from the Labor Department showed last week. The U.S. economy expanded at a 3.2 percent annual rate in the fourth quarter, as consumer spending climbed by the most in more than four years, figures from the Commerce Department showed on Jan. 28.

In response to audience questions, Lockhart said he saw no indications that rising wages could fuel inflation with unemployment around 9 percent.

“With 9 percent unemployment, we have many, many human resources underutilized,” he said. “I don’t see the conditions of rising wage pressures developing under those circumstances.”

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Federal Reserve Bank of Atlanta President Dennis Lockhart said a rise in Treasury yields since the start of central bank bond purchases in November indicates growing confidence the U.S. recovery will gain strength. There was a view shared by officials in some places that...
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Thursday, 10 Feb 2011 02:54 PM
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