By Yali N’Diaye

FT MYERS, Fla. (MNI) – Atlanta Federal Reserve President Dennis
Lockhart Friday said he is prepared to support a change in monetary
policy should the Fed’s inflation objective become “at risk.”

Lockhart also said he is confident the rise in short-term measures
of inflation “will not persist” and that the central bank’s inflation
objective of 2% per year is “attainable.”

“I am prepared to support a change of policy if evidence
accumulates that the low and stable inflation objective is at risk,” he
told the Bonita/Estero Market Pulse Conference in Fort Myers, Florida.

“For now, however, I remain satisfied that the current stance of
monetary policy is appropriately calibrated to the current and projected
state of the economy and supportive of both the employment and price
stability objectives,” he continued.

On the growth side, his outlook for the rest of 2011 and for 2012
is a “net positive,” he said, despite headwinds.

Those include home prices that remain under pressure, higher
commodity prices that also cut into households budgets, the ongoing
caution of lenders, and global uncertainties due to developments in
Japan, the Middle eats and North Africa.

As a result, “consumer see a yellow light, not a green light,” said
Lockhart, who is not a voting member of the Federal Open Market
Committee this year.

In addition, “new business formation is constrained by tight
credit,” he said. At the government level, “this year and next, the
government sector is likely to be in contractionary mode for the first
time since 1994.”

Besides, the political process associated with budget resolution is
another cause for uncertainty.

Those headwinds, however, are more than offset by “tailwinds,” he
said, citing the substantial improvement in households and business
finances, expecting businesses to star using their cash.

On the labor market, “employment has been growing gradually,”
Lockhart said, adding, that going forward, “meeting production goals in
response to growing demand may more and more require hiring additional
workers.”

So looking at both headwinds and tailwinds, Lockhart said the
balance is a “net positive outlook.”

“A self-reinforcing virtuous circle of final demand is increasingly
becoming established,” he said. “Our base case forecast at the Federal
Reserve Bank of Atlanta sees continuation of the storyline of moderate
growth, gradually declining unemployment, and the settling of price
movements around an inflation rate that is consistent with the Federal
Reserve’s price stability objective.”

Indeed, “I continue to see the Federal Reserve’s inflation
objective I just outlined as attainable,” Lockhart said.

He added that, “While short-term measures of inflation have moved
up rather strongly in the last few months, I hold to the view that this
trajectory will not persist.”

As a result, the FOMC’s current monetary stance is appropriate both
in light of economic conditions and outlook, and inflation expectations.

** Market News International **

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