Fed’s Lockhart Hints at Near-Zero Rates for “Much Longer”

The Federal Reserve’s Bank of Atlanta President, Dennis Lockhart, was the latest U.S. central banker to lay out the dovish case for monetary policy.

With the economy slowing down in recent months, Lockhart stated that the Fed could leave interest rates near all-time lows for longer than currently anticipated by the markets.  ”The chairman said it’s at least two or three meetings and it could go much longer,” he noted in an interview with Fox Business News.

“What the Fed can do is to sustain its current policy until it’s clear that we are seeing really much stronger growth and we’re seeing progress in bringing unemployment down,” he continued.

Lockhart went on to echo comments made last week by Federal Reserve Chairman Ben Bernanke.  In addition to acknowledging that inflation expectations are considerably higher than a year ago, Lockhart said that “I am still predicting we will have a much stronger second half and a stronger beginning to 2012. Clearly the first half of the year is disappointing.”

Concerning fiscal matters, the The Atlanta Fed President contended that the U.S. Congress should be careful to not reduce government spending too quickly, which could hamper the already-modest economic recovery.

While Lockhart presented a substantially dovish stance, he did not go so far as to suggest a third round of quantitative easing, QE3.  Nonetheless, the Fed’s near-zero interest rate policy has been a driving force behind the gold price’s ascent to new all-time highs, and if the same monetary policy continues, the yellow metal’s outlook is likely to remain bright.