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 Dennis Lockhart, president of the Federal Reserve Bank of Atlanta,
said the year had begun with some momentum, despite the recent drop
in stock markets, and further reductions in the pace of central bank
asset purchases would be appropriate as long as the economy remained
on track.
"Absent a marked adverse change in the outlook for the economy, I
think it is reasonable to expect a progression of similar moves,
with the asset purchase program completely wound down by the fourth
quarter of the year," he said in remarks prepared for delivery to
the Rotary Club of Birmingham.
The Fed has trimmed back its monthly bond purchases by $10 billion
at each of its last two meetings, a pace many economists expect to
continue for the rest of the year. Policymakers next meet in March
for the second of eight scheduled meetings this year, when they will
have to consider whether to cut purchases again from the current $65
billion a month.
But Lockhart, a centrist at the central bank who does not have a
vote on monetary policy this year, urged patience when it came to
lifting benchmark interest rates from their current near-zero level.
The Fed has said it will keep rates at rock bottom well past the
time unemployment falls below 6.5 percent, especially if inflation
remains below its 2 percent target. The jobless rate has fallen to
6.7 pct, with a new reading due on Friday.
"We could cross that threshold before long," he said, adding that
this made how long to keep the Fed funds rate at 0-0.25 percent the
key policy question.
He personally did not see any change in rates until well into 2015
and thought the Fed should wait for more clarity on the outlook for
growth, jobs and inflation.
"We policymakers should be patient — not too quick to respond to
zigs and zags in the data," he said.
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"In my view, the (Federal Open Market) Committee should stay the
course and let more clarity emerge on the sustainability of the
recent pickup in growth, the path of inflation relative to the 2
percent target, and the nature of the employment situation."
Lockhart said numbers for the first three months of the year could
be "not-so-great," noting that bad weather and an unwinding of the
build-up in inventories, which boosted growth in late 2013, could
hurt economic output and even jobs.
But he said overall, there were signs of rising confidence in the
U.S. economic outlook.
"I think the fundamentals have improved, and the economy is likely
to continue to perform in a higher gear over the full-year 2014," he
said.
Lockhart, like other policymakers, said inflation expectations were
well-anchored and he expected inflation to gradually accelerate
towards the Fed's 2 percent target, hitting that level towards the
end of 2015.
But, with a fair amount of slack still in the economy, he was
"monitoring wage and price developments carefully for evidence that
inflation will move back toward 2 percent."
(Reporting by Krista Hughes; editing by
Andrea Ricci)
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