Federal Reserve Bank of Atlanta President Dennis Lockhart said a fragile recovery shown by the weak jobs report last week could require additional stimulus if it becomes clear growth is slowing.
Current policy is “appropriate” for now, Lockhart said in a speech in Fort Lauderdale, Florida. “Should it become clear that something resembling my baseline scenario of continued, though modest, growth is no longer realistic, further monetary actions to support the recovery will certainly need to be considered.”
The policy-setting Federal Open Market Committee meets June 19-20 to consider whether more stimulus is warranted amid signs the U.S. economy is slowing. Employers in May added the fewest workers in a year, and the unemployment rate rose to 8.2 percent, Labor Department figures showed June 1.
“As the employment report of last Friday illustrates, there continues to be a halting and tenuous character to the recovery,” Lockhart said to the Broward Workshop, a local business group.
Fed officials will update their forecasts for growth, unemployment and inflation. Policy makers favoring more stimulus include Boston Fed President Eric Rosengren, who said on May 31 the central bank should cut joblessness by prolonging beyond this month a program that lengthens the average duration of bonds on its balance sheet.
Lockhart has told reporters after prior speeches this year the threshold for more action is “high,” including “a serious deterioration in the economy” or threat of falling prices.
Today’s speech emphasized continued risks, including those from the U.S. fiscal policy debate and from the European debt crisis, which has the potential for “spillover” to the U.S. financial system.
“The situation we face requires that the FOMC maintain a state of readiness to respond to financial or economic instability should the need arise,” Lockhart said. “I am confident that the committee retains the capacity to act and the tools to promote stability.”
The Atlanta Fed president called recent economic data “underwhelming.”
“It is nearly impossible to escape the conclusion that we are replaying in some manner the spring-summer slowdowns of the past two years,” he said. “The economy remains in recovery but, as the disappointing employment numbers illustrate, the economy is working against some strong headwinds.”
Several Federal Reserve policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery going, minutes of their last meeting showed. The policy-making Federal Open Market Committee on April 25 reiterated its expectation that subdued inflation and economic slack will probably warrant “exceptionally low levels for the federal funds rate at least through late 2014.”
Lockhart, 65, a former Georgetown University professor, has led the Atlanta Fed since 2007. Fed presidents rotate voting on monetary policy, with Lockhart voting this year. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.
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