Fed's Lockhart sees chance of surprisingly strong U.S. growth
(Reuters) - U.S. economic growth could surpass expectations this year, but an anemic labor market requires ongoing support from monetary policy, a top Federal Reserve official said on Monday.
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, cited strength in sectors such as housing, autos, and energy production and exploration as factors that could push the U.S. economy to grow at a rate beyond his current forecast for a range between 2 percent and 2.5 percent.
"If momentum continues and some of the potholes out there are avoided, particularly a political crisis around fiscal decisions, growth could accelerate," Lockhart said at a conference at the University of Tennessee.
Still, Lockhart said current growth rates were not enough to speed up the drop in unemployment, and he therefore suggested the U.S. central bank will have to maintain its current bond-buying stimulus for much of this year.
"Continuing the asset purchase program to support the recovery and to improve employment conditions remains appropriate for now," he said. "And given the outlook and associated risks, I am comfortable with sticking with the current approach at least into the second half of the year."
Lockhart said the inflation outlook is currently benign, adding he does not believe the U.S. central bank has reached the point where the potential costs of quantitative easing, or QE, outweigh its benefits.
Lockhart is not a voting member this year on the policy-setting Federal Open Market Committee.
Wall Street was taken aback by minutes from the last couple of Fed policy meetings, given heightened discussion about the policy risks from a prolonged period of low interest rates. The Fed has kept official borrowing costs effectively at zero since the end of 2008, and it has bought more than $2.5 trillion in Treasury and government securities in an effort to push down long-term borrowing costs.
Despite such efforts, the recovery has remained anemic, and unemployment has come down only slowly. The jobless rate remains elevated at 7.9 percent.
Against that backdrop, the Fed recently vowed to keep rates near zero until unemployment falls to 6.5 percent, as long as inflation looks to remain under control.
Lockhart emphasized that full U.S. employment would require a jobless rate even below that level, stressing that the new policy threshold was merely an "interim goal."
(Reporting by Pedro da Costa in Washington; Editing by Leslie Adler)
- IPhone emerges from 'bygone era', reviewers hail bigger handset
- Fed may hint on rate-hike plan as it prepares for policy turn
- Scots' support for independence lags on eve of referendum |
- Boeing, SpaceX win contracts to build 'space taxis' for NASA
- Islamic State campaign tests Obama's commitment to Mideast allies