Federal Reserve Bank of Atlanta President Dennis Lockhart said today that he is “pretty comfortable” with the risks posed by the European financial crisis.
“The financial risk has been reduced recently, quite literally in the last two or three weeks,” Lockhart said today in a panel discussion at the Commerce Club in Atlanta. “It’s not been taken off the table, but it’s been reduced.”
He also said threats of fewer U.S. exports to Europe and a drop in income from tourism are not big enough “to imperil the overall recovery in the U.S.,” and that “I don’t see too much danger coming from Europe through real-economy channels.”
Treasury Secretary Timothy F. Geithner said March 20 that while Europe has assuaged financial tensions, it faces a “long and difficult path of reform.” Europe is facing a possible second recession in less than three years as the region’s finance ministers, meeting tomorrow in Copenhagen, will seek to establish the size of their rescue fund.
European policy makers are trying to strike a balance between meeting international demands for a more powerful war chest and opposition in donor countries led by Germany to providing additional aid for underperforming economies on Europe’s fringes.
“We’re seeing signs of recovery” in the U.S., while the housing industry remains “relatively weak,” said Lockhart, who is a voting member of the policy-making Federal Open Market Committee this year. Lockhart, a former Georgetown University professor, has led the Atlanta Fed since 2007.
Recent reports underscore a strengthening U.S. recovery as a healing job market boosts optimism among consumers. Fed Chairman Ben S. Bernanke said March 26 that “continued accommodative policies” from the central bank will be necessary for the economy to make further progress.
The Fed has held interest rates near zero since 2008 and purchased $2.3 trillion in bonds to spur growth after unemployment rose to as high as 10 percent in 2009. The jobless rate is currently 8.3 percent, and the economy has been expanding for more than two years.
Lockhart on March 23 said he favors a monetary policy of “patient vigilance” and didn’t rule out the possibility of more stimulus if the economy slows.
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