Atlanta Federal Reserve Bank president Dennis Lockhart Thursday said that policymakers must be “mindful” of the U.S. dollar’s global role and the vast foreign holdings of dollar-denominated debt.

Lockhart, a voting member of the Fed’s policymaking Federal Open Market Committee, made the comment in the context of the need for the central bank to preserve its independence and thereby avoid political pressure to “monetize” the exploding federal debt.

At this point, he said, the Fed is not monetizing the debt, despite its large-scale purchases of long-term Treasury securities.

Lockhart downplayed inflation risks while saying there are downside risks to a “fragile” economic recovery in remarks prepared for delivery to the World Affairs Council in Jacksonville, Fla.

After rising for months as risk-averse investors put their money into the safe haven of U.S. securities, the dollar has depreciated sharply against other currencies more recently.

— Market News International

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