Urgency appropriate in addressing weak economy: Fed's Lockhart

MADRID Tue Feb 12, 2013 2:19pm EST

MADRID (Reuters) - Economic policymakers must be mindful of the risk that too timid a policy response could further complicate an already weak U.S. recovery, Atlanta Federal Reserve Bank President Dennis Lockhart said on Tuesday.

Predicting the U.S. economy would remain weak, registering between 2 percent and 2-1/2 percent growth this year, Lockhart warned of the risk that unemployment could become more entrenched if left unaddressed.

"A sense of urgency is appropriate," he said in prepared remarks to a conference in Madrid. "If policymakers are too patient, what started as cyclical problems can evolve into structural problems."

"I think faster growth would indeed improve employment conditions significantly," he added.

Still, he cited some pockets of strength in the United States, including a recovering housing market, firm auto sales and a "vibrant" natural gas market.

U.S. gross domestic product shrank unexpectedly in the fourth quarter and, while the decline was seen as temporary, unemployment remains at an elevated 7.9 percent.

The Fed has vowed to continue its asset purchase program, currently set at $85 billion per month, for as long as the employment outlook fails to improve substantially. It has also promised to keep rates near zero until the jobless rate falls to 6.5 percent as long as inflation looks set to remain under control.

Still, there are growing signs of concern about the potential side-effects of unconventional monetary policy on financial markets.

(Reporting By Pedro Nicolaci da Costa; Editing by Andrea Ricci and Chizu Nomiyama)

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