A top Federal Reserve official said Monday that the Fed is in a "wait and see" mode on possible additional stimulus for the struggling economy but agreed with Fed Chairman Ben Bernanke that a failure by Washington to raise the ceiling on the national debt would be "calamitous" for it.

"The time has come to deal with this issue and get it behind us," Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said in an interview with FOX Business. "The debt ceiling has to be raised and I think we're risking, in the next two to three weeks and beyond, some pretty serious downside to the general economy if this is not done. So I certainly emphasize what the chairman said, that the outcome could be calamitous."

Lockhart's comments came as the Obama Administration and Congressional Republicans continued wrestling over how to raise the debt ceiling in combination with steps to reduce federal budget deficits. Bernanke weighed in on the fight at a hearing last week. The current ceiling is $14.3 trillion, with this year's deficit projected at more than $1 trillion for the third year in a row.
Lockhart said Bernanke made "a good argument" when he told lawmakers last week that while deficit reduction is critical to the nation's long-term prosperity, they should be careful about cutting spending while the economic recovery remains tentative.

Lockhart added, however, "I prefer not to really delve into that debate--whether cutting spending soon versus later is important. Certainly, the government is a big part of the economy. It will be a shrinking part of the economy in the future and we're going to have to deal with the reality of fiscal austerity at some stage in the future."

Lockhart said economic growth so far this year--less than 2% on a annualized basis--has been a "disappointment."

But like Bernanke and some other Fed colleagues, he said be believes the recovery was hurt by temporary shocks such as the spike in oil prices and the earthquake in Japan that disrupted supplies of auto parts and other important products. As a result, he said, Fed does not need to launch any additional stimulus programs at this time.

"I'm still predicting that we'll have a much stronger second half and a stronger beginning to 2012," Lockhart said. "I'm really--and I think many of my colleagues are--in a 'wait and see' mode. I am not sure that the returns to further stimulus would be all that great."

In late 2008, to help support the economy during the financial crisis and recession, the Fed cut short-term interest rates to near zero, maintained them there and plans to keep them there for an "extended period," a length of time it has chosen not to clearly define.

But last fall, with the recovery sputtering amid fears deflation (falling prices, which can be destructive to an economy), the Fed approved an additional, unconventional stimulus measure--extra purchases of U.S. Treasury securities, $600 billion worth, to help keep longer-term interest rates low and pump additional cash into the banking system, a move known as "quantitative easing."

The Fed ended its latest "QE" program in June. But with economic growth weakening again and job creation stalling, analysts have speculated the Fed may launch another round of securities purchases.

In fact, in his Congressional testimony, Bernanke said that more quantitative easing was one option for the Fed if weak economic growth persisted, though he also said the central bank was not close to deploying it again and suggested the Fed also would need to see a renewed risk of deflation to approve it.

Lockhart echoed Bernanke's QE comments.

"I've said publicly several times that I think there's a very high bar to a second round of quantitative easing," he said. "The conditions that we're facing now are not the conditions we faced last November when it was implemented. At that time we were actually looking at the potential for deflation in the economy. Inflation expectations really were coming down rather markedly...Now the conditions, I think, are quite different. And I would never take any option off the table, but I do think it's a very high bar to implementation of another round."

As for other steps the Fed could take to stimulate job creation--the unemployment rate has remained stubbornly stuck at about 9%--Lockhart cited continuation of the Fed's current policies.

"The current policy...is very accommodative, is supportive of the continuing recovery," he said. "So I think what the Fed can do is to sustain its current policy until it's clear that we are seeing really much stronger growth and we're seeing progress in bringing unemployment down."

Asked how long the Fed could maintain existing policy, he echoed Bernanke's comments last month that it could continue through at least two or three more meetings of the Fed's policy-setting body, the Federal Open Market Committee, which meets four more times this year.

But he said, "It could go much longer--it's conceivable. And so I view it as a purposely somewhat ill-defined or undefined term that means that the policy will stay in place for a reasonable number of months and the shortest that it means is two or three meetings."

Lockhart is not currently a voting member of FOMC. But as part of the central bank's regular rotation of FOMC membership among its 12 regional bank presidents, Lockhart has been a voting member of the committee in the past and will return as one in January. Voting member or not, all Fed bank presidents participate in FOMC meetings.

On other economic and monetary policy issues:

    --on potential of a "double dip" recession, Lockhart called it "unlikely" but with the recent slowdown in economic growth, he would not "totally rule it out."
    --on his outlook for inflation, he said the Fed's argument that the recent rise in prices was temporary "is in fact playing put," especially in light of last week's government report showing that the consumer price index fell in June due mainly to the recent pullback in oil and gasoline prices.
    --on the housing market, Lockhart said he does not see a "quick turnaround...I think this is just going to be a continuing slog until some of the underlying problems in the housing sector get more into the zone of being solved."

Peter Barnes joined FOX Business Network (FBN) in September 2007. He serves as FBN's senior Washington correspondent.