Housing remains economy's weak spot, Atlanta Fed CEO says
Housing remains a soft spot in an “otherwise encouraging picture” for the economy, said Dennis Lockhart, chief executive officer of the Federal Reserve Bank of Atlanta. While speaking at the 2011 NABE Economic Policy Conference, Lockhart said Monday that the housing market is still in recovery with housing sales slowly improving and inventories down from peak levels. However, he warned housing supply still outpaces demand, sending prices in a constant state of fluctuation. “Prices of homes were still falling at year end and may still be seeking a bottom,” Lockhart said. Residential construction did inch up a bit in January, but only slightly, he added. As for the overall economy, Lockhart believes it’s “demonstrating moderate strength” and expects growth in the range of 3% to 4%, with gradual employment increases over the course of the next one to two years. As far as economic policy, Lockhart emphasized a move to a less accommodative policy stance, essentially backing the Federal Reserve away from future quantitative easing programs such as the one launched in November. The program drew criticism from policy makers who feared the move would create inflationary pressures. Instead, Lockhart prefers “another round of large-scale asset purchases and an exit to a less accommodative policy stance." Lockhart emphasized his belief that Federal Reserve independence is a key component of economic stability. This assertion comes at a time when criticism of the Fed and its expansionary policies is at an all-time high among certain policy makers. Write to Kerri Panchuk.