Fed’s Lockhart Remains Cautious in Reducing Asset Purchases

Federal Reserve Bank of Atlanta President Dennis Lockhart, who has backed the Fed’s $85 billion in monthly bond purchases, said policy makers should move cautiously this year to the extent that U.S. economic performance remains too mixed to lay out a detailed path for reducing and eventually halting their asset-purchase stimulus plan at their September meeting.

 

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The president of the Federal Reserve Bank of Atlanta said central bank policy makers should move cautiously this year in deciding when and how to scale back its bond-buying program.
 
Atlanta Fed chief Dennis Lockhart said the central bank could make its first reduction in its $85 billion per month bond buying program any time before the end of the year, but isn’t locked into to doing so following its September meeting.
Mr. Lockhart said the “most influential” for him is monthly payroll jobs number but he will also look at other factors, including inflation measures.
 
Recent economic data has shown that the labor market is strengthening, though he is “somewhat concerned” about part-time and temporary jobs pushing up overall job gains. He also characterized recent economic growth as “lackluster.”
 
He stressed that the initial reduction is only the beginning of the process and officials will make adjustments based on the latest economic data. With the unemployment rate falling to 7.4% in July, many economists expect the Federal Reserve to start slowing the pace of purchases next month.
 
Even after the first step is taken, Lockhart said it wouldn’t be advisable for the Federal Reserve to offer a “precise, beginning-to-end path” for ultimately ending bond purchases.

 

All Fed members’ speeches since the last FOMC meeting (July 30-31) are available here.