The U.S. economy is on track for a sustained recovery but remains sufficiently weak to warrant the help of loose monetary policy, Atlanta Federal Reserve President Dennis Lockhart said on Monday.
I remain satisfied that the current stance of monetary policy is appropriately calibrated to the current and projected state of the economy, Lockhart said in remarks that largely resembled a speech he gave in Florida on Friday.
Lockhart also indicated that, despite recent improvements in the economic data, he sees little reason to cut short the U.S. central bank's $600 billion bond-buying stimulus. He pointed to a weak housing market, noting home values had yet to stabilize.
My working assumption continues to be that (the program) will be completed as it was originally designed on the same time frame, Lockhart told reporters after a speech.
That view put him at odds with St. Louis Fed President James Bullard, who said over the weekend policymakers should consider curtailing the program.
Lockhart said he was not worried about the threat of inflation at the moment, in part because growth in wages, a big part of business costs, has remained so tame.
While short-term measures of inflation have accelerated in the last few months, I hold to the view that this trajectory will not continue, he said.
Inflation fears have ratcheted up recently on a spike in oil and commodities costs, driven in part by political upheaval in countries like Libya and Bahrain. Oil traded in the United States has risen to near $105 a barrel.
However, he said the Fed would closely monitor measures of consumer price expectations for signs that an inflationary psychology is taking hold.
For some economists on Wall Street, this was already happening, though some gauges of underlying costs remained tame.
The personal consumption expenditures price index outside food and energy, closely watched by Fed officials, rose just 0.9 percent in the year to February, still far below policymakers' presumed target of 2 percent or a bit below.
If inflation perceptions picked up perceptibly, Lockhart said, the Fed would be forced to act.
I am prepared to support a change in policy if evidence accumulates that the low and stable inflation objective is at risk, he said.
The U.S. economy expanded at a 3.1 percent annualized clip in the fourth quarter. The jobless rate, for its part, has come down rapidly in recent months, falling to 8.9 percent in February from as high as 9.8 percent late last year. However, Lockhart said not all of the drop is encouraging, since part of it could be traced to discouraged workers dropping out of the labor force.