Atlanta Fed's Lockhart Voices Support for Quantitative Easing
The current state of the U.S. economy has Atlanta Fed president and chief executive officer Dennis Lockhart wondering, "Is this the best we can achieve?" With U.S. unemployment at 9.6 percent and inflation measures stable but rather low, the economy is clearly "not where we want it to be," he said in an October 18 speech in Savannah, Ga.
As a result, Lockhart and other Fed policymakers are now weighing the benefits and risks of further action. More specifically, a second round of quantitative easing—popularly termed QE2—has been discussed as a tool to jumpstart the sluggish economy.
The Fed last embarked on a program of large asset purchases from late 2008 until the spring of 2010. During that period, the Fed bought $1.25 trillion of mortgage-backed securities, $300 billion of Treasury securities, and $175 billion of agency debt securities.
QE2 among leading options
Although the decision is far from being clear-cut, Lockhart voiced his support for further action. "At this juncture, and given the circumstances of sluggish growth and measured inflation that is too low, I give greater weight to the risk of further disinflation leading to deflation. In my mind, QE2 is a form of risk management—an insurance policy that is prudent to put in place at this time," he explained.
Pondering an inflation objective
October 28, 2010