Tags: fed | policy | rate | Lockhart

Fed's Lockhart: Policy Appropriate for Uneven Recovery

Tuesday, 14 Feb 2012 07:57 PM

The Federal Reserve's ultra-easy stance on monetary policy is adequate for an economy that has shown signs of improvement but remains erratic, the president of the Atlanta Fed, Dennis Lockhart, said on Tuesday.

Lockhart, a voter on the Federal Open Market Committee this year, said he was heartened by signs of strength in employment and manufacturing and by what he called the "beginnings" of an expansion in credit.

And the central bank's indication last month that it would likely leave borrowing costs near zero until at least 2014 is still valid given lingering uncertainties, he added.

"The recent economic news has been encouraging, but in my view we haven't seen enough sustained improvement to be sure it will last," Lockhart said in prepared remarks for delivery at an event at the New College of Florida.

"The current policy stance is appropriate for an outlook of steady, moderate growth with gradual employment gains."

Lockhart said the Fed's decision to set an explicit inflation target of 2 percent was an important way to anchor inflation expectations and allow businesses to plan for the future.

He said guidance on the timing of an eventual interest rate hike was also part of a strategy of more open communications.

"Better and fuller communications is a policy tool. This tool now includes both dated rate guidance and an inflation target over the longer run," he said. "Both of these expectations influencers should help consumers, businesses and financial markets anticipate the path of interest rates."

Still, that does not mean the inflation target or the rates guidance are set in stone. Indeed, Lockhart emphasized that the target is flexible, saying it might sometimes not be advisable to chase it in the short run. He added that the late 2014 policy benchmark was also conditional on the economic outlook.

© 2017 Thomson/Reuters. All rights reserved.

   
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2012-57-14
Tuesday, 14 Feb 2012 07:57 PM
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