Lockhart: Still Need to Weigh QE2 Costs, Benefits

Despite “leaning” toward further monetary stimulus, “the decision is not clear cut” for additional quantitative easing, or QE2, and costs and benefits need to be debated, Federal Reserve Bank of Atlanta president Dennis Lockhart said Monday.

“In my mind, QE2 is a form of risk-management,” he said in prepared remarks released by the Fed. “An insurance policy that is prudent to put in place at this time.”

Lockhart said he would also like the Fed to adopt a more explicit inflation objective, which would strengthen further stimulus and compensate for potential risks.

“I am leaning in favor of additional monetary stimulus while acknowledging the longer-term risks the policy may present,” he said. “Given the circumstances of sluggish growth and measured inflation that is too low, I give greater weight to the risk of further disinflation leading to deflation.”

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