October 3, 2013 / 6:44 PM / 7 years ago

Fed's Lockhart says government shutdown to hurt fourth quarter U.S. growth

ATLANTA (Reuters) - The partial shutdown of the U.S. government after Congress failed to agree on a plan to fund operations will hurt growth in the last quarter of this year, a top Federal Reserve official said on Thursday.

The U.S. Capitol building is seen on Tuesday morning after the federal government was shutdown when the House and Senate failed to pass a budget in Washington October 1, 2013. REUTERS/James Lawler Duggan

“If it is protracted then I would expect there would be some measurable impact at least in fourth-quarter growth,” said Dennis Lockhart, president of the Federal Reserve Bank of Atlanta.

Speaking to reporters at a conference at the Atlanta Fed, Lockhart said the Fed’s decision not to taper its bond buying stimulus of the economy was vindicated by the fiscal impasse.

The Fed opted at its policy-setting meeting last month not to reduce monthly bond purchases, partly on concerns over the fight in Congress over funding the government.

The government was partly shut down on October 1 after Congress failed to agree on a budget.

Lockhart also said the dearth of government economic data as a result of the shutdown was making it harder to gauge the economy’s health.

But he indicated there was still a chance the Fed could taper this year, saying he believed the timeframe that Fed Chairman Ben Bernanke suggested in June was “still in place,” but it would depend on the economy’s performance.

In June, Bernanke said he expected the Fed to moderate the pace of purchases later in the year.

The fiscal fight in Washington could have a prolonged effect, Lockhart said.

“I would say that events like the government shutdown or conceivably a debt ceiling debate that undermines confidence has a lasting effect in that it makes our economy look more prone to politically induced shocks.”

Reporting by Karen Jacobs; Writing by Andrea Ricci; Editing by Krista Hughes

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