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"It would take a rather dramatic change" to
adjust the tapering of the Fed's monthly bond purchases, Dennis
Lockhart, president of the Federal Reserve Bank of Atlanta, said
in the Saudi capital.
Echoing other recent comments by Fed officials, Lockhart also
said the Fed would be likely to use a broader mix of policy
tools in future, relying less heavily on the overnight federal
funds rate.
Lockhart, who said he was speaking in his personal capacity,
does not have a vote this year on the Fed's policy-setting board
but he participates in its discussions and is considered to be
near the center of its policy spectrum.
The Fed began scaling back its bond-buying program - aimed at
pushing down borrowing costs - in recent months amid signs of an
upturn in the jobs market.
It is currently buying $45 billion each month, a figure Lockhart
said on Sunday in a speech in Dubai should fall to zero by the
central bank's October or December meeting.
The Fed introduced the bond purchases as an extra stimulus on
top of ultra-low overnight interest rates, which it has kept
near zero since late 2008 to help the U.S. economy recover from
a profound recession.
The central bank's primary tool for conducting monetary policy,
the Fed funds rate measures the interest at which commercial
banks lend money parked at the Fed to each other.
Lockhart told reporters that while the Fed funds rate still had
a role in the policy mix, it might not be as dominant in future.
"There are some longer-term policy tools like term repos, term
reverse repos, and term deposits, so we would neutralize excess
reserves by paying a little bit more to a bank to effectively
sideline their reserves for a period of time," he said.
Dallas Fed chief Richard Fisher suggested last week that the
central bank could replace the Fed funds rate in the years
ahead, and other tools had been tested.
The U.S. economy hardly grew in the first quarter but has
gathered pace since.
Also on Sunday, Lockhart said he expected growth to accelerate
in the second quarter to an annual rate of 3 percent or more,
but it might not be clear for some time if the pick-up was
sustainable.
(Reporting by Angus McDowall; Writing by Martin Dokoupil;
Editing by Jeremy Gaunt and John Stonestreet)
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