Four Fed regional bank presidents see less need for easing

April 5 (Bloomberg) -- Four Federal Reserve regional bank presidents who vote on monetary policy this year see less of a need for the Fed to spur the economy with new accommodation.

“The probability of needing to do additional stimulus is lower,” San Francisco Fed President John Williams told reporters yesterday. Cleveland’s Sandra Pianalto, Atlanta’s Dennis Lockhart and Richmond’s Jeffrey Lacker also spoke against additional accommodation this week, with Lacker saying yesterday he “was surprised a couple months ago at the probability market participants seemed to ascribe to further easing.”

The presidents’ comments echo the minutes of the Fed’s March 13 meeting, in which a “couple of” participants called for easing only “if the economy lost momentum” or if inflation fell below the central bank’s 2% target. Fed officials will hold their target interest rate close to zero at least through 2014, a date “subject to revision in response to significant changes in the economic outlook,” according to the minutes released on April 3.

Stocks fell for a third day today, with the Standard & Poor’s 500 Index dropping 0.2% to 1,396.80 at 9:56 a.m. after a 1% decline yesterday and a 0.4% decline on April 3. The yield on the 10-year Treasury fell to 2.19% from 2.22% as speculation the euro region’s sovereign- debt crisis is worsening increased demand for the safest assets.

Voting Power

Eleven regional bank presidents rotate voting on monetary policy with Lacker, Williams, Lockhart and Pianalto voting this year. The New York Fed President and the Washington-based Fed governors always have a vote.

St. Louis Fed President James Bullard, who votes next year, said today that he also sees no need for additional easing as the performance of the U.S. expansion exceeds expectations.

“An appropriate approach at this juncture may be to continue to pause to assess developments in the economy,” Bullard said today in a speech in St. Louis. “Past behavior of the committee suggests a ‘wait-and-see’ strategy at this juncture,” he said.

The Fed’s forecasting staff revised up their near-term outlook for U.S. growth “a little,” and reduced their estimate of potential U.S. output as unemployment fell faster than expected in a period of moderate economic growth, according to the minutes.

Higher Gasoline Price

The best six months of job growth since 2006, unemployment at a three-year low, and stock-market gains are giving Americans the means to withstand a higher gasoline price. A March 30 report from the Commerce Department said Americans increased their spending by the most in seven months, with purchases climbing 0.8% in February.

“While further easing is obviously something that’s conceivable, I wouldn’t favor it unless conditions deteriorated quite substantially” for growth and inflation, Lacker told reporters and editors at the Bloomberg News Washington bureau.

Pianalto and Lockhart also expressed reluctance about further easing this week.

“I would have to see some pretty severe circumstances before I endorse for another round of quantitative easing,” Lockhart said in an April 3 interview on Bloomberg Radio’s “Hays Advantage” with Kathleen Hays. “The outlook is positive enough that I am not sure I see the need for it.”

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