WRAPUP 1-Fed officials back ‘extended period’ language

By Mark Felsenthal

WASHINGTON, April 15 (BestGrowthStock) – Top Federal Reserve
officials on Thursday showed little urgency about softening
the central bank’s promise to hold rates low for a long time,
suggesting that vow will be left unchanged after the Fed’s
meeting at the end of the month.

The Fed has held benchmark borrowing costs near zero to
support the economy as it recovers from the worst downturn in
decades. It has promised to hold rates exceptionally low for
an extended period to provide an extra measure of
encouragement for borrowing.

However, as the economy shows signs of recovery, notably
the addition of 162,000 jobs in March, financial markets are
watching for any evidence that policy-makers are ready to ease
their commitment to an extended period of low rates. Such a
switch would be seen as a precursor to tightening financial
conditions, though how soon is also a matter of speculation.

Fed officials who spoke on Thursday appeared inclined to
agree with Fed Chairman Ben Bernanke, who told Congress
earlier this week that the central bank expects very low rates
will be needed for an extended period, but that if conditions
improve or inflation rises, the Fed would respond.

“At some point in the future, we’re going to need to begin
to adjust the language, to begin to see changes in the
substance of the policy,” Atlanta Fed Bank President Dennis
Lockhart told reporters after delivering a speech to a
business group in Pensacola, Florida.

“The substance of the language, I continue to support,” he
said, adding he was not calling for any immediate changes to
it. Lockhart is not a voter on the Fed’s policy-setting
Federal Open Market Committee this year.

IT ALL “DEPENDS UPON THE ECONOMY”

Another senior Fed official, Richmond Fed Bank chief
Jeffrey Lacker, said earlier this week that recent signs of
recovery have led him to think that a muting of the extended
period language should come “sooner rather than later.”

However, Lacker said on Thursday he doesn’t see any
pressing need to remove the language from the Fed statement
yet.

“I’m comfortable with interest rates where they are now,”
Lacker, also a non-voter, told reporters at a Fed symposium on
credit markets in Charlotte, North Carolina.

The Richmond Fed president said that once the Fed — the
U.S. central bank — removes the extended period language, it
would not necessarily mean that it will raise interest rates
shortly thereafter.

“There’s no set period of meetings or months” before the
Fed would raise borrowing costs, he said.

St. Louis Fed Bank President James Bullard said the
“extended period” promise should reflect more “conditionality”
on the state of the economy, a top official of the U.S.
central bank said on Thursday.

Bullard, an FOMC voter this year, said the pledge should
not be linked to a specific time frame.

“Everything depends on economic performance, and we’d like
to be able to convey that,” Bullard told reporters after a
speech to the Levy Economics Institute in New York.

A fourth Fed president who spoke on Thursday, Dallas Fed
Bank President Richard Fisher, vowed at a Johns Hopkins
University conference that the Fed would not print money to
fund U.S. budget deficits, but he did not directly address the
outlook for monetary policy.

Fisher is currently a non-voting member of the FOMC.
Stock Market Today

(With additional reporting by Joe Rauch in Charlotte, North
Carolina; Kristina Cooke and Emily Flitter in New York, and
Pedro da Costa in Pensacola, Florida; Editing by Jan Paschal)

WRAPUP 1-Fed officials back ‘extended period’ language