By Pedro Nicolaci da Costa
Feb 25 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."