* Accumulating bond purchases could complicate Fed exit
* No imminent risks to global financial stability
* Weak jobs market still a major concern for Fed
By Pedro Nicolaci da Costa
ATLANTA, Jan 14 The Federal Reserve's
unconventional monetary stimulus has its limits, and could pose
threats to market functioning and financial stability if pushed
too far, Atlanta Fed Bank President Dennis Lockhart said on
In another sign of growing reticence about the Fed's
bond-buying quantitative easing program within the central bank,
Lockhart, seen as a policy centrist who tends to fall in line
with Chairman Ben Bernanke, said the open-ended approach to bond
buys does not mean there are no constraints on the policy.
"'Open ended' does not mean 'without bound.' The program is
not 'QE Infinity,'" he said in a speech to the Rotary Club of
Lockhart emphasized a weak U.S. job market is still a major
concern for Fed policymakers, and urged fiscal authorities to
come to some kind of resolution on budget matters, which might
help lift some of the uncertainty hurting business investment.
"Unemployment, underemployment, and abandonment of efforts
to find a job, taken together, present a sobering picture for
policymakers," Lockhart said.
The unemployment rate was 7.8 percent in December and was
expected to come down all too gradually in 2013. At the same
time, inflation looks set to remain below the Fed's 2 percent
target for the foreseeable future.
Despite that outlook, minutes from the Federal Open Market
Committee's December meeting showed several policymakers thought
the central bank might have to halt or curtail the current $85
billion monthly securities purchases. Lockhart's speech
suggested the sentiment is relatively widespread.
"The accumulating purchases of bonds could complicate the
FOMC's efforts to withdraw monetary stimulus when the
appropriate time comes. We have tested tools for exit, but it
will be uncharted territory," Lockhart said.
Still, Lockhart said he saw no imminent risks to the
stability of the global financial system.
"I don't see any really immediate threats to financial
stability," Lockhart told reporters after a speech.
He forecast the U.S. economy would expand between 2 percent
and 2.5 percent this year.
"The Fed has done a great deal to date to promote recovery,
but the ongoing effectiveness of Fed efforts does depend
critically on the removal of fiscal policy uncertainty," he
Among reasons for optimism, Lockhart cited recent signs of
strength in housing, a recent boom in auto sales and a rise in
U.S. energy exploration and production.
In response to the financial crisis and deep recession of
2007-2009, the Fed cut official interest rates to effectively
zero and bought over $2 trillion in securities to keep long-term
Some economists worry the bloated $2.9 trillion balance
sheet could lay the groundwork for future inflation. Others,
however, note the rate of U.S. economic expansion remains too
far beneath its potential for persistent price pressures to take