Atlanta Fed President Lockhart Addresses Debate on Further Easing
After explaining the Federal Open Market Committee's (FOMC) June decision to extend the maturity extension program commonly referred to as "Operation Twist," Atlanta Fed President Dennis Lockhart told the Mississippi Economic Council on July 13 that another high-stakes policy decision could loom—whether to respond more aggressively to the economy's apparent weakness.
Considering dual viewpoints
But there are other considerations before taking a side in that debate, Lockhart said. "Before taking a position on this two-sided question, it's my view that one has to wrestle with three sub-issues," he said.
The issues he cited are:
Lockhart offers his view
Second, he believes the Fed's policymaking FOMC can manage the risks that would come from further use of the Fed balance sheet to promote continued recovery or financial stability. He added that more expansion of the balance sheet "should be undertaken very judiciously. Such a step would take us further into uncharted territory."
On the third question regarding the effectiveness of more policy action, Lockhart advises "modest expectations." "I do not think this means monetary policy is impotent or has reached its limit," he said. "But I don't see more quantitative easing or similar policy action as a miracle cure, especially absent fixes in policy areas outside the central bank's purview."
July 26, 2012