Friday, 15 Oct 2010 09:29 AM
U.S. economic growth is too weak at the moment to bring down
unemployment, and inflation is running at levels that raise
concern about deflation, Atlanta Federal Reserve President
Dennis Lockhart said on Friday.
"We've slowed down pretty dramatically. Inflation is running too
low. It is too close conceivably to the kind of tipping point
into a deflationary environment," he told a question-and-answer
session on the economy and business with Home Depot Chief
Financial Officer and Executive Vice President Carol Tome.
Lockhart spoke as Fed Chairman Ben Bernanke delivered a speech
in Boston that all but cemented expectations the Fed will take
further steps to ease monetary policy in November.
Investors presume that, with benchmark U.S. interest rates
effectively at zero, the Fed will do this by purchasing
additional Treasury bonds.
Hinting he would support such a decision, Lockhart said not all
U.S. unemployment can be explained by "structural" factors such
as mismatches between workers' skills and available jobs.
"I have heard a very strongly argued view that the natural rate
of unemployment in our country may have risen, but it is not 9.6
percent, so that suggests that there is a gap there that can be
addressed by policy," Lockhart said.
U.S. unemployment has been stuck near that level for several
months following a steep recession that destroyed over eight
million jobs. The economy returned to growth last summer, but
activity has since softened considerably, with gross domestic
product expanding just 1.7 percent in the second quarter.
Late last month, Lockhart said he had not yet made up his mind
about how much of the rise in the U.S. jobless rate was
structural and how much of it was due to a post-recession slump
in demand, saying the answer would help determine his view on
policy.
Lockhart is not a voting member this year on the Federal Open
Market Committee, the Fed's policy-setting body.
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