OXFORD, Miss. - Atlanta Federal Reserve Bank President Dennis Lockhart Friday called the October jobs report positive, but said proof of an entrenched jobs recovery would be needed for the Fed to begin to consider dialing back its $85 billion a month in asset purchases.
Speaking to reporters after a speech in Oxford, Mississippi, Lockhart also said he would be willing to consider such a move at the December meeting of the Federal Open Market Committee. Lockhart is not a voter until 2015.
Asked by MNI if the strong surge in the October payrolls data has shifted his thinking about when to begin taper, Lockhart said the 204,000 increase was an encouraging number.
He injected a note of caution, however, calling it "good practice not to react too immediately on one month's positive number...this is a period in which there are a lot of unusual things going on."
"So for that reason, I would be a little reticent to draw up very profound conclusions from one month's positive jobs number," Lockhart added, saying he wants to learn more about the participation effect.
Still, Lockhart said if the FOMC finds the employment data to be "convincing," or that jobs growth is going to be sustained, "that will certainly advance the time in which it would be appropriate or the timing would be right to possibly pull back on asset purchases."
So could the move come as soon as the committee's December meeting?
Lockhart said the data leading up to that gathering may still have some "noise" related to the government shutdown, "but, speaking for myself, I would not take off the table at least consideration at that time."
Changing the mix of the Fed's accommodative tools "ought to be on the table at every meeting for the foreseeable future," he added.
One of those tools, the FOMC's forward guidance on interest rates, is a "powerful" instrument that can be "a direct stimulative form of accommodation," Lockhart said. "I have no question long term rates influence consumer spending and business investment spending."
"Guidance is more than just information," he continued, "it can be an influential tool."
In prepared remarks, Lockhart had said it may be appropriate for the FOMC to adjust it policy tool mix going forward.
Asked by the audience to provide an example, he said among the options - besides tapering asset purchases - would be to "strengthen or elaborate further on forward guidance" to convince markets and the public that the Fed means what it says regarding how long interest rates will remain low.
Lockhart said there has been significant discussion on consequences of very long low rate environment, and said given Fed's forward guidance it's "a reasonable expectation" interest rates will remain low for quite some time.
The central bank, he said, "sees no option but to keep a low rate environment" given it is missing out on both its mandates.
So could it lower its unemployment threshold from 6.5% to add more stimulus? "I'm sort of agnostic on that at the moment," Lockhart said, although "that is another way of conveying that this low interest rate environment is likely to be sustained for quite some time."
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