Inflation not a big worry, top Fed officials say
By Judy Wiley and Matthew Bigg
DALLAS/ATLANTA (Reuters) - The risk of U.S. inflation is minor compared with an ongoing morass in the jobs market, two top Federal Reserve officials said after the government reported a steady 9.1 percent jobless rate.
However, both Dallas Federal Reserve Bank President Richard Fisher and Atlanta Fed chief Dennis Lockhart sounded skeptical of pushing for further monetary easing and unsure of how much it might help.
"The economy currently is weak, but not dramatically weakening. It is sort of bumping along at a very low level. There's a mix of data, some of it is negative but some of it is mildly positive," Lockhart said.
"I do not think we can take any monetary policy option off the table but I continue to think that the conditions in which we would invoke another round of large-scale asset purchases should be pretty demanding conditions," he told a forum at Emory University in Atlanta.
Fisher, who has dissented against more stimulative policy at the central bank's two latest meetings, said inflation was not currently a concern.
The bigger problem is jobs, Fisher said. The Fed has done a "great deal" to boost the economy, he said, adding that if he believed "fiddling with the yield curve" and easing monetary policy further could add more stimulus, he would support it.
Fisher reiterated his long-held view that it is fiscal authorities who are holding back recovering by not providing clarity on tax and regulatory policy.
The Fed cut overnight interest rates to near zero in December 2008 and has bought $2.3 trillion in securities in a further attempt to spur economic growth.
Last month, the central bank announced a program dubbed Operation Twist in which it will channel its ongoing bond purchases toward longer-dated Treasuries to put more downward pressure on long-term borrowing costs.
The U.S. economy grew at less than a 1 percent annual rate over the first half of the year, and while economists think it's growing a bit more strongly now, recession worries have mounted as Europe's debt crisis threatens to spill over.
On Friday, the U.S. Labor Department reported 103,000 new jobs were created in September, better than economists expected but not enough to put a dent in the 9.1 percent jobless rate.
Consumers are still paying down debts accumulated before the Great Recession, and any spending they are doing now is eating into their "seed corn," Fisher said, in a reference to the farming roots of his A&M audience.
"I think it's going to be a very, very long haul" before households are able to boost spending again, he added.