–Won’t Rule Out Minds Being Changed At November FOMC

By Brai Odion-Esene

SAVANNAH, Ga. (MNI) – Atlanta Federal Reserve President Dennis
Lockhart Monday said any program of monetary stimulus implemented by the
Fed must be “reasonably large” to have the desired impact.

He also told reporters during a briefing after a speech to the
Savannah Rotary Club that he does rule out the possibility that members
of the Federal Open Market Committee that are for, or against, more
quantitative easing could change their minds at the November policy
meeting.

Lockhart during the briefing reiterated what he had made clear in
his prepared remarks, that, “In principle, I am now leaning in favor of
some quantitative easing.”

Any additional QE the Fed does, Lockhart argued, “has to be
reasonably large to have an effect … ; clearly it has to be of a
magnitude that is going to have a positive effect.”

Asked by Market News International if a decision to inject
additional monetary monetary stimulus is already a foregone conclusion,
even before November’s FOMC meeting, Lockhart said he expects a healthy
deliberation.

“I would not completely eliminate the possibility that minds will
be changed at the meeting,” he said, adding the meeting will not be one
where camps are already so aligned that a change of view could not
occur.

The questions of how another program of quantitative easing would
be implemented deserves “a lot of discussion and staff input,” Lockhart
said, in order to know exactly what the effects would be.

Asked if the volatility in currency markets could influence the
Fed’s decision whether or not to conduct more easing, Lockhart said the
exchange value of the dollar “is one of several considerations” that the
FOMC will factor in when deciding the right policy.

But could this add fuel to global currency tensions? Lockhart
repeated that from his perspective, currency considerations are not
factored in greatly, but he would not rule out the possibility “that we
might be in circumstances that would require greater weight” be given to
the dollar’s situation.

During the question and answer session with the audience, Lockhart
said the FOMC should develop a consensus inflation target of between
1.7% to 2%.

He later told reporters that the general public can understand
inflation targeting, and putting one in place would be “a good step.”

An inflation target, he said, would compensate for risks from the
Fed doing more quantitative easing, and that current conditions make
instituting an inflation target “much easier.

As for the recent controversy over mortgage foreclosures and
investigations into whether banks evicted homeowners that were current
on their mortgage payments, Lockhart said the Fed is doing “quite a bit”
in cooperation with other regulatory agencies.

“We are doing ad-hoc exams of the major mortgage servicing
institutions as well as other banks that have a pretty significant
servicing flow,” he said.

Lockhart cautioned, however, that not enough is known yet to say
for sure if fraudulent behavior was involved.

** Market News International **

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