By Pedro Nicolaci da Costa
(Reuters) – U.S. economic growth could surpass expectations this year, but an anemic labor market requires ongoing support from monetary policy, a top Federal Reserve official said on Monday.
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, cited strength in sectors such as housing, autos, and energy production and exploration as factors that could push the U.S. economy to grow at a rate beyond his current forecast for a range between 2 percent and 2.5 percent.
Financial markets are again on edge about the direction of Fed policy following the surprisingly hawkish minutes of the January meeting released last week, even if most still expect the central bank to keep buying bonds at the current $85 billion monthly pace at least until the end of the year.
Federal Reserve Board Governor Jeremy Stein, an academic economist who joined the central bank last May, surprised Fed-watchers in his latest speech by focusing entirely on the risks of recent monetary stimulus and saying very little about its benefits. In particular, Stein, a corporate finance expert, raised the possibility that a bubble might be forming in the corporate bond markets, which has seen yields fall to record lows and issuance to record highs.
WASHINGTON (Reuters) – U.S. Federal Reserve officials are likely to press on with their bond-buying stimulus program even though some harbor growing concerns the purchases could fuel an asset bubble or inflation if pushed too far.
A full-throated debate among U.S. central bankers over the wisdom of ongoing quantitative easing, or QE, sent U.S. stock prices down sharply when minutes of the meeting were released on Wednesday.
The Federal Reserve is cognizant of the potential costs of its unconventional policies, but the economic benefits from asset purchases are still far greater than the potential costs, Atlanta Fed President Dennis Lockhart told Reuters in an interview from his offices.
What follows is an edited transcript of the interview.
The December meeting minutes seemed to signal a shift in sentiment at the central bank toward a greater focus on the policy’s costs. How concerned are you about the risks from QE? Has the cost/benefit tradeoff changed for you? What’s your sense of how long you’ll need to keep going?
WASHINGTON, Feb 20 (Reuters) – The weakest U.S. economic
recovery in recent memory could be damaging the country’s
long-term growth potential, according to a number of Federal
Policymakers at the central bank expressed such concerns at
their Jan. 29-30 policy meeting, according to minutes of the
meeting released on Wednesday.
Richard Fisher, the Dallas Fed’s colorfully hawkish president, enjoys touting the remittances that the central bank makes yearly to Treasury, earned, circularly enough, mostly on the returns of the Treasury bonds the Fed holds. Here’s Fisher in September 2010:
All the emergency liquidity facilities that the Federal Reserve instituted were closed down and did not cost the taxpayers of this great country a single dime. Indeed, last year, as we finished up this work, the Federal Reserve paid $47.4 billion in profits to the Treasury. Imagine that! A government agency that (a) created programs that actually worked as promised, (b) made money for the taxpayers in the process and (c) undid the programs – all in the space of about 28 months – once they had done their job.
ATLANTA (Reuters) – The Federal Reserve’s latest monetary stimulus program is still appropriate through the end of this year given an anemic labor market despite the U.S. economy’s brightening prospects, a top Fed official told Reuters on Tuesday.
Atlanta Federal Reserve Bank President Dennis Lockhart, who is seen as a bellwether centrist at the central bank, said in an interview the avoidance of the so-called fiscal cliff earlier this year has removed some of the uncertainty that had weighed on the U.S. recovery.
WASHINGTON, Feb 11 (Reuters) – The Federal Reserve’s
aggressive and ongoing easing of monetary policy is warranted
given the still-battered state of the U.S. labor market, Fed
Vice Chairman Janet Yellen said on Monday.
In an address to the politically influential AFL-CIO, the
nation’s largest labor group, Yellen, seen as a potential
successor to Fed Chair Ben Bernanke next year, focused on the
anomalously weak nature of the recent economic expansion.
WASHINGTON (Reuters) – The Federal Reserve is still aggressively stimulating an anemic U.S. economic recovery that has failed to bring rapid progress on employment, Fed Vice Chair Janet Yellen said on Monday.
In a rare address to the AFL-CIO, a politically influential labor union, Yellen, seen as a potential successor to Fed Chair Ben Bernanke next year, focused on the anomalously weak nature of the recent economic expansion.
Is it full steam ahead for the Fed’s QE3 or is the U.S. central bank having second thoughts? Next week’s veritable assembly line of speeches from Fed officials could help answer that question. Vice Chair and possible Bernanke successor Janet Yellen kicks off the week with remarks to an AFL-CIO conference. She is followed by numerous regional Fed presidents, the bulk of them with hawkish tendencies: Esther George, Jeffrey Lacker, Charles Plosser and Dennis Lockhart on Tuesday, St. Louis’ James Bullard on Wednesday and Thursday, and finally, Cleveland Fed President Sandra Pianalto Friday. Oh, and the Fed’s regulatory point person, board governor Daniel Tarullo, testifies before the Senate Banking Committee on Thursday. The topic is a now-perennial one: “Wall Street Reform.”