Lockhart still cautious on Fed pullback despite jobs bounce

OXFORD, Mississippi Fri Nov 8, 2013 12:25pm EST

Dennis Lockhart, President, Federal Reserve Bank of Atlanta, and Charles Evans (L), President and CEO, Federal Reserve Bank of Chicago, take part in a panel discussion titled ''Twist and Shout: The Limits of U.S. Monetary Policy'' at the Milken Institute Global Conference in Beverly Hills, California May 1, 2012. REUTERS/Danny Moloshok

Dennis Lockhart, President, Federal Reserve Bank of Atlanta, and Charles Evans (L), President and CEO, Federal Reserve Bank of Chicago, take part in a panel discussion titled ''Twist and Shout: The Limits of U.S. Monetary Policy'' at the Milken Institute Global Conference in Beverly Hills, California May 1, 2012.

Credit: Reuters/Danny Moloshok

OXFORD, Mississippi (Reuters) - A top U.S. Federal Reserve official said on Friday he is still worried that U.S. economic growth is too slow to continue pushing down unemployment, despite better jobs figures for October.

Atlanta Fed President Dennis Lockhart said while the job market has improved quite a bit since the end of the 2007-2009 recession, the deepest in generations, a lot more progress is still needed to return to healthier conditions.

Forecasting better growth in gross domestic product for next year, around 2.5 percent to 3 percent, Lockhart said 2014 is still likely to end with the Fed falling short of both its inflation and employment mandates.

The U.S. central bank will therefore continue to stimulate the economy, though it may rely more on forward guidance on the path of policy rather than outright bond purchases, he said.

"There are real concerns about whether the recent modest pace of GDP growth is enough to maintain employment momentum," Lockhart said.

"Monetary policy overall should remain accommodative for quite some time. The mix of tools we use to provide ongoing monetary stimulus may change, but any changes will not represent a fundamental shift in policy."

The U.S. economy generated a larger-than-expected 204,000 net new jobs in October, fanning speculation the Fed might start to trim its $85 billion monthly bond purchases as early as December rather than waiting until 2014.

In response to a severe financial crisis and deep recession, the Fed has not just slashed rates to effectively zero but also bought over $3 trillion in mortgage and government bonds to lower long-term borrowing costs and boost growth.

The U.S. economy has been dampened by budget battles in Congress that have led to tighter fiscal policy despite a falling budget deficit, economists say.

This austerity has been one reason why the Fed has kept its stimulus in place for longer than it might have liked.

(Reporting by Pedro da Costa; Editing by Krista Hughes)

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