The risk of a new U.S. recession has risen over the last couple of months, but an outright contraction will most likely be avoided, Atlanta Federal Reserve Bank President Dennis Lockhart said on Monday.

Lockhart said there is plenty the central bank could do if the economy does deteriorate further, including ramping up asset purchases or shifting their composition.

The bar is still very high for additional asset buys though, with Lockhart saying he would need to see renewed deflation risks or a spike in unemployment before he could support such a policy.

But he indicated he was open to the notion of extending the maturities of bonds on the Fed's balance sheet, which already stands at a record $2.9 trillion, by reinvesting proceeds of maturing securities or even selling short-dated ones.

Among the options is a changing of the duration of the portfolio, he told reporters after a speech.

Recent market volatility, driven in part by concerns of slowing economies both in the United States and Europe, threatens consumer confidence and could put a crimp on spending, Lockhart told a Rotary Club meeting.

The events of the last several weeks are a reminder that circumstances can quickly arise that may call for additional monetary stimulus, Lockhart said.

Last week, the Fed took the unprecedented step of promising to keep interest rates, which have been effectively zero since the end of 2008, near rock-bottom for at least another two years.

Lockhart said in his view, the time frame of the low-rates pledge hinged on economic conditions, and could be altered as the economic winds shift.

Even though the Fed had only made a verbal promise about rates themselves, its balance sheet policy should align with explicit rates policy, he said.

Delving into the reasons for wild recent swings in global financial markets, Lockhart said the ups and downs were in part a reaction to the downgrade of the U.S. AAA credit rating.

He said worries about Europe have also been at the forefront, with investors fearing France's ratings could be next on the chopping bloc.

There have been escalating concerns about the condition of specific banks in Europe that have high exposure to Italy and other peripheral countries, Lockhart said.

Still, he was relatively sanguine about the U.S. financial system.

There is no lack of liquidity in the banking system. There has been, however, some stress in the money market mutual fund world, mostly before the debt ceiling was raised, Lockhart said.

We have not seen a renewal of solvency concerns here in the United States.