Atlanta Federal Reserve Bank President Dennis Lockhart described the Fed's aggressive monetary easing measures last week as a "forceful attempt" to stimulate the economy and reduce unemployment, but indicated Friday he is prepared to support even "more action" if the economy doesn't improve.

Lockhart, a voting member of the Fed's policymaking Federal Open Market Committee, said "additional asset purchases" are one option.

After expressing some ambivalence about additional monetary stimulus in recent months, Lockhart ended up voting with the 11-1 majority last Thursday when the FOMC announced it would buy $40 billion per month of mortgage backed securities until the outlook for the labor market improves "substantially."

The FOMC also extended its "forward guidance" on the path of the federal funds rate to "at least through mid-2015." And it said it "expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens."

"The necessary natural healing from the large disruption of the financial crisis will certainly be supported, and likely accelerated, by the stance of policy with the new features introduced last week," he said.

Lockhart said he felt "a call to action" after August data showed the economy was slowing from an already "anemic" pace. And he said he came to the conclusion that weak labor market conditions can be "ameliorated" by monetary policy, despite disagreements among his colleagues about the extent to which joblessness is cyclical or structural.

Lockhart described the FOMC's two-pronged stimulus campaign as "a preventative" -- aimed at improving economic prospects "by reducing the potential downside apparent in the incoming data."

But he said he expects the policies to "do more than just prevent backsliding."

To be effective, he said the new measures "must lower interest rates, raise asset prices, and reduce policy uncertainty."

"These intermediate results must increase confidence of consumers and businesses," he continued. "That must lead to a heightened inclination to spend, invest, and take risk. And these actions must result in more economic activity, rising demand, and ultimately hiring."

Lockhart called the MBS purchases "well-timed" with recent housing market improvements, echoing comments made in a news conference Thursday on the sidelines of a Kansas City Fed jobs forum.

"By maintaining downward pressure on mortgage rates and by encouraging growth of mortgage-financed purchase activity, sales activity ... should accelerate, and upward pressure on home prices should contribute to consumer confidence," he said. "The policy action should have positive  sector-specific effects with spillover to general conditions."

"An improving housing sector will help calm one headwind that has impeded a stronger recovery," he added.

Lockhart said "MBS purchases will continue until we see a better employment situation."

"If we do not see improvement, more action may be taken," he said adding, "I hope the resolve of the FOMC is clear."

To reinforce the point, he said the FOMC statement and Chairman Ben Bernanke's comments in his post-FOMC news conference "emphasized that further policy actions, possibly in the form of additional asset purchases, will be decided on the basis of the extent of improvement in the outlook for labor market conditions over the coming months."

Lockhart said "the outlook for inflation will also be a critical consideration," but he had earlier observed that while inflation has "hewed closely" to the Fed's 2% target, "the record of employment gains has been less comfortable."

He said he "couldn't entirely rule out the weakening of other headwinds," such as the fiscal cliff and the European debt crisis. If those headwinds dissipate, he said "the outlook could be considerably more favorable in a few months' time."

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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