By Emily Stephenson
ATLANTA Feb 27 The Federal Reserve will
probably keep benchmark interest rates low for "quite a while"
even as the U.S. central bank begins to raise them from their
current near-zero level, a top Fed official said on Thursday.
Atlanta Fed President Dennis Lockhart told a conference in
Atlanta that he expects the Fed to begin raising rates in
mid-2015 but to do so slowly. Lockhart is a policy centrist
whose views often reflect those at the core of the central bank.
"I think it's going to be a while before lift-off," Lockhart
said. "I think we will be in this low interest rate environment
for quite a while."
Speaking on the same panel, the hawkish chief of the Kansas
City Fed, Esther George, said it could be important to move
toward a more normal rate environment "sooner rather than later"
in light of financial stability concerns and the need to head
off any threat of future inflation.
Lockhart and George spoke on a wide-ranging set of topics at
a conference hosted by the Atlanta Fed on the outlook for
banking in the next year.
Both officials said they thought new Fed Chair Janet Yellen,
who took over from Ben Bernanke this month, would provide
continuity for the central bank going forward.
They also said they thought regulators had more work to do
before they could claim to have ended the problem of "too big to
fail" banks, which refers to banks that are so big their failure
would threaten financial markets.
U.S. officials have been working to implement the 2010
Dodd-Frank financial oversight law, including revamping mortgage
underwriting and servicing and cracking down on big non-bank
Some of the biggest requirements are done, including the
controversial and long-awaited Volcker rule to curb proprietary
trading. But others, such as working out how to resolve giant,
failed banks without bailing them out, are still in progress.
"I would suggest we haven't ended 'too big to fail,' and
that's because we have not ... completed the work that has been
assigned," George said.
She said regulators must crack down on the so-called shadow
banking sector and that she supports a proposed leverage ratio
that would limit how much banks can fund themselves through
Lockhart said he thought the risk of a big bank requiring a
bailout was much lower today, but that the mega-bank problem was
still a "condition" regulators are treating rather than one that
had been cured.