| WASHINGTON/NEW YORK/LONDON, March 6
WASHINGTON/NEW YORK/LONDON, March 6 The U.S.
economic outlook would have to change dramatically for the
Federal Reserve to alter the pace at which it is winding down
its massive bond-buying program, three top U.S. central bankers
said on Thursday.
And one, Atlanta Fed President Dennis Lockhart, told Reuters
in an interview that even a third month of below-par U.S. jobs
growth would not be enough to warrant such a move.
While Fed Chair Janet Yellen has stressed that her planned
wind-down of the stimulus program is not on a preset course, the
comments Thursday from Fed officials spanning the policy
spectrum make it clear that the hurdle for any change is high.
Weak economic data, even if it persists for a few more
months, does not meet that test, all three said.
"In my mind, unless we really fall off track in the economy
pretty dramatically, I think the tapering program should
proceed," Lockhart told Reuters.
He added that the recent softness in economic data was
likely due to unusually severe winter weather and cautioned that
it could be April or May before the Fed has a clear read on the
underlying strength of the economy in the first quarter.
"There could be conditions in which a pause or even a
renewal of purchases would be necessary, but I think the bar is
very high," said Lockhart, considered a policy centrist at the
New York Fed President William Dudley, who leans toward the
dovish end of the policy spectrum, agreed.
The threshold for changing course on stimulus withdrawal is
"pretty high," he said during an event hosted by The Wall Street
Journal. "The outlook would have to change in a material way
relative to my expectation."
At an event in London the hawkish head of the Philadelphia
Fed, Charles Plosser, said: "We are on this path now and we are
not going to deviate from that path unless something pretty
The Fed this year started winding down five years' worth of
unprecedented accommodative policies meant to fight the 2007-09
recession and foster a stronger recovery.
That means the central bank will eventually stop buying
trillions of dollars worth of bonds and holding overnight
interest rates at zero.
Dudley acknowledged that recent fierce winter weather in
parts of the nation had depressed activity in early 2014, but
said those effects will be both hard to gauge and transitory.
"The weather is going to make reading the data over the near
term a little more difficult," he said.
Plosser, who like Dudley votes this year on the Fed's
policy-setting panel, predicted it would take two more months
before the Fed can get a clear reading on economic data.
That suggests that even if Friday's closely watched jobs
report falls short of expectations, Yellen would likely press
ahead with reductions to the Fed's bond-buying program, known as
quantitative easing, or QE.
The Labor Department is expected to report on Friday that
U.S. businesses added 149,000 jobs in February and the
unemployment rate remained unchanged at 6.6 percent, according
to a Reuters survey of economists.
Where the policymakers differed was in their views on how
soon the Fed may need to raise rates.
Plosser cautioned that the Fed should leave the door open to
speeding up the taper, or risk being behind the curve as the
economy gains traction.
"If the economy continues to improve, we could find
ourselves still trying to increase accommodation in an
environment in which history suggests that policy should perhaps
be moving in the opposite direction," he said.
Dudley, whose forecast of 3 percent growth for the U.S.
economy this year matches Plosser's, suggested otherwise, saying
that headwinds are likely to persist for some time.
"We have a long time to go before we actually have to think
about raising short-term rates in my opinion," said Dudley,
whose views are extremely influential at the Fed policy-setting
Traders of short-term U.S. interest rate futures put the
first rate hike at some time in late 2015, based on trading at
CME Group Inc's Chicago Board of Trade.
Both Lockhart and Dudley said those expectations are
reasonable, given what is known about the economy today.
Last year, the Fed said it would not consider raising rates
until the jobless rate fell to at least 6.5 percent, just a
tenth of a percentage point from where it is now.
But policymakers have downplayed that threshold in recent
months. Economists fear the falling unemployment rate partly
reflects large numbers of workers leaving the labor force.
Lockhart, Dudley and Plosser all said the 6.5 percent
threshold is providing little value and needs to be revisited.