Atlanta Federal Reserve Bank President Dennis Lockhart called Tuesday for "a sense of urgency" in reducing unemployment and said monetary policy has "a critical role" to play in spurring faster economic growth and job creation.
However, Lockhart suggested that monetary stimulus alone is not the answer, saying other policy adjustments are also needed to achieve greater prosperity.
Lockhart, who is not a voting member of the Fed's policymaking Federal Open Market Committee this year, said he looks for only modest improvement in the pace of growth this year, given assorted obstacles to faster growth.
He did not get into the specifics of Fed policy two weeks after the FOMC reaffirmed plans to buy $85 billion of bonds per month to hold down long-term interest rates until it sees "substantial" improvement in the labor market outlook and reiterated that it will hold short-term rates near zero "for a considerable time after the asset purchase program ends and the economic recovery strengthens.
But Lockhart, who voted for those measures last year, gave every indication he continues to back aggressive monetary stimulus in remarks prepared for delivery at the Instituto de Empresas in Madrid, Spain.
Pointing to high and long-lasting unemployment and saying that increased demand is needed to help reduce joblessness, Lockhart said, "A sense of urgency is appropriate for this goal."
"If policymakers are too patient, what started as cyclical problems can evolve into structural problems," he said. "I think faster growth would indeed improve employment conditions significantly."
As part of the solution, Lockhart said "monetary policy can deliver
appropriately favorable interest rate conditions, always in a context of low and
"Monetary policy plays a critical role in creating the most favorable conditions for other policy actions to do their work," he added.
However, "in the pursuit of economic growth and increased employment, there is no silver bullet," Lockhart said. "Rather, the policy community should be pursuing an effective mix of policy elements (with focus in areas such as new business formation, labor rules, and regulatory efficiency, to name a few) that together catalyze a virtuous circle of innovation, growth, and employment."
After growing at a "very sluggish" 2.1% pace since 2009, GDP growth should pick up this year, but not to more than 2.5%, said Lockhart, who cited a number of impediments to faster growth: household finance problems, "constricted" credit and "very cautious" business attitudes.
There are "hopeful signs," he said, including improved home and auto sales and energy sector developments. But he said it is necessary to remove fiscal and other uncertainties.
To foster growth, innovation, and job creation, Lockhart said "policymakers can remove obstacles to growth-for example, uncertainty regarding the fiscal path of government, policies that discourage new business formation, and disincentives to invest."
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