Fed officials see high hurdle for changing course on QE taper

Thu Mar 6, 2014 4:49pm EST
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By Jonathan Spicer, Luciana Lopez and Marc Jones

WASHINGTON/NEW YORK/LONDON (Reuters) - The U.S. economic outlook would have to change dramatically for the Federal Reserve to alter the pace at which it is winding down its massive bond-buying program, three top U.S. central bankers said on Thursday.

And one, Atlanta Fed President Dennis Lockhart, told Reuters in an interview that even a third month of below-par U.S. jobs growth would not be enough to warrant such a move.

While Fed Chair Janet Yellen has stressed that her planned wind-down of the stimulus program is not on a preset course, the comments Thursday from Fed officials spanning the policy spectrum make it clear that the hurdle for any change is high.

Weak economic data, even if it persists for a few more months, does not meet that test, all three said.

"In my mind, unless we really fall off track in the economy pretty dramatically, I think the tapering program should proceed," Lockhart told Reuters.

He added that the recent softness in economic data was likely due to unusually severe winter weather and cautioned that it could be April or May before the Fed has a clear read on the underlying strength of the economy in the first quarter.

"There could be conditions in which a pause or even a renewal of purchases would be necessary, but I think the bar is very high," said Lockhart, considered a policy centrist at the Fed.

New York Fed President William Dudley, who leans toward the dovish end of the policy spectrum, agreed.   Continued...

The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst