Bloomberg News

Lockhart Says Economy Doesn’t Need New Bond Buying Now

June 27, 2012

Federal Reserve Bank of Atlanta President Dennis Lockhart said while a new bond-buying program remains an option, current conditions don’t call for the Fed to take such an aggressive step.

So-called quantitative easing is “certainly an option,” Lockhart said in an interview with “Nightly Business Report” on PBS Television. Even so, “I don’t think the conditions have developed that require us to bring out bigger guns quite yet.”

Lockhart said “dramatically” slower growth and a threat of falling prices are among the conditions that might prompt him to consider more bond purchases. The Fed has already bought $2.3 trillion of securities in two rounds aimed at reducing borrowing costs, spurring economic growth and reviving the job market.

The policy-making Federal Open Market Committee on June 20 expanded the Fed’s maturity-extension program, known as Operation Twist. Central bank officials also downgraded their forecasts for growth and employment while noting “significant downside risks” to the economy.

“The Operation Twist extension through year-end I view as the maintenance of a policy that was in place that keeps pressure on longer-term rates,” Lockhart, who votes on the FOMC this year, said in the transcript of the broadcast interview.

Further Expansion

The Atlanta Fed chief urged his central bank colleagues to take their time in reviewing the outlook.

“I would argue we need to be a little bit patient here to look at the incoming data and to size up what is really happening and also stand ready for whatever external events might affect the economy,” he said.

By contrast, Chicago Fed President Charles Evans, meeting with reporters, today called for new easing, including more asset purchases, to spur economic growth. “We should be doing more accommodation than what was adopted under the Twist,” he said in Chicago.

Lockhart, 65, a former Georgetown University professor, has led the Atlanta Fed since 2007. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.

To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net


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