NEW YORK - Federal Reserve Bank of Atlanta President Dennis Lockhart views current monetary policy as appropriate and wants to keep all options open for the future, but he said that more asset purchases are not a “potent policy option” under the circumstances.
Saying he favors keeping the federal funds rate target at zero to 25 basis points and “the balance sheet steady at current scale,” Lockhart told a crowd at the University of Georgia, “I am skeptical that further asset purchases will produce much gain in terms of increased economic activity. I don't believe further bond purchasing by the Fed is a potent policy option given the set of circumstances we currently face. But that is not to say that such a policy action would not be powerful and appropriate in other circumstances, and I don't think any option should be taken off the table.”
Continued moderate economic growth, with inflation behaving, and net job creation can be expected, but Lockhart sees slow progress on unemployment in 2012.
The most prominent risk to the U.S. economy now, Lockhart says, is the ongoing sovereign debt crisis in Europe. Other risks include the supercommittee’s failure, housing weakness, slow consumer spending, deleveraging by households, commercial real estate restructuring and weak credit expansion.
