CHATTANOOGA, Tennessee The U.S. economy is unlikely to slip back into recession, and an improvement in recent indicators has been encouraging, Atlanta Federal Reserve Bank President Dennis Lockhart said on Tuesday.
While he did not directly address the outlook for monetary policy, Lockhart suggested he was happy for the central bank to take a wait-and-see mode given an economy that remains weak but is not falling off a cliff.
Let's not talk ourselves into believing that enduring weakness or recession is inevitable, he told the CFA Society of East Tennessee at a local golf resort. Much of the incoming data have exceeded most forecasters' low expectations.
Lockhart said Europe's debt crisis posed a major threat to the U.S. economy, as does the prospect that a prominent panel of U.S. politicians will fail to reach agreement on ways to rein in the budget gap.
Still, Lockhart noted that growth has remained insufficient to put a significant dent in the nation's elevated 9.1 percent jobless rate, and was unlikely to quicken sufficiently to drive progress on employment in the near future.
U.S. gross domestic product grew under 1 percent in the first half of this year, despite the Fed's extraordinary effort to support growth with its ultra-easy monetary policy. In September, the Fed announced a new policy whereby it will sell $400 billion in short-term Treasury securities and use the proceeds to buy long-term bonds.
The idea is to push long-term borrowing costs even lower, though many economists doubt the policy will have a discernible effect on the economic expansion.
(Reporting by Pedro Nicolaci da Costa; Editing by Diane Craft)