Aug 30 It will be a "close call" when U.S.
central bank policymakers meet next month to decide whether to
ease policy more, the head of the Federal Reserve Bank of
Atlanta said on Thursday.
Dennis Lockhart, a centrist voting member on the Federal
Reserve's policy-setting committee, said further stimulus would
have some positive effect on the U.S. economic recovery, but
cautioned the costs of such action are not altogether clear.
"If we were to see deterioration from this point - let's say
persistence of job growth numbers that were well below 100,000 a
month ... or if we were to see signs of disinflation that could
signal the onset of deflation - then there wouldn't be much of a
question about policy," Lockhart told CNBC.
"But now I think the policy question is, how much will you
gain and of course what are the costs in the short and longer
term," he said as an annual central bankers symposium kicked off
in Jackson Hole, Wyoming, where Fed President Ben Bernanke gives
a much anticipated speech on Friday.
The Fed in late 2008 slashed interest rates to near zero and
has since bought $2.3 trillion in long-term securities in an
unprecedented drive to spur growth and revive the economy after
the worst recession in decades. Yet the recovery, especially in
jobs, has been slow and economic growth stumbled this year,
stoking expectations the central bank will act again.
Some economists expect Fed policymakers to unveil a third
round of asset purchases known as quantitative easing, or QE3,
at their Sept. 12-13 meeting.
"Further stimulus, if we were to put that in place, would
have some positive effect," Lockhart said on Thursday, adding he
was not "overly concerned" about the longer term costs of more
The policymaker argued it was possible for the Fed to push
longer-term interest rates even lower than they already are,
signaling that could be done by pushing into the future the date
the Fed has targeted for keeping overnight rates near zero.
On Aug. 1, the central bank repeated that it expected to
keep rates near zero at least through late 2014. Minutes from
the meeting show that many Fed policymakers wanted to adjust
that date at the time, but that the decision was put off to the
Meanwhile, speculation the Fed would loosen policy further
has been slightly dampened by a rebound in retail sales and a
pick-up in jobs growth in July, a month in which nonfarm
payrolls rose by 163,000. But the jobless rate edged up to 8.3
percent last month, and recent data on business spending and
inflation supported more action.
Only 44 percent of fund managers in the Reuters global asset
allocation poll published Thursday now think the Fed will
announce QE3, down from 70 percent in the same poll last month.
Lockhart said it was a good time to "take stock" in the
performance of the U.S. economy.
Gross domestic product growth has been around 2 percent
throughout the recovery, he said, calling it "very modest" and
not "likely to make great progress in bringing down
unemployment." Inflation has been "well behaved" near 2 percent,