US Monetary Policy, Current Concerns of a Fed Policymaker


Hosted by the International Finance Student Club at Johns Hopkins SAIS

Dennis P. Lockhart, President and CEO of the Federal Reserve Bank of Atlanta

November 16, 2016

Navigating the country through the economic recession of 2008 has been a delicate job for monetary policy makers. Dennis Lockhart of the Federal Reserve Bank of Atlanta returned to Johns Hopkins SAIS, where he graduated in 1971, to share his experience with current students.

Beginning his job as bank president in March 2007, Lockhart walked through the highlights of US monetary policy during his tenure. The federal funds rate in 2007 was set at 5.5% comparing with 0% at the end of December 2008 as a response to financial crisis, with unemployment reaching 10% in the process.

To support economic recovery, the Fed implemented quantitative easing, a process through which the central bank essentially creates new money and buys long term securities. During this process, the Fed’s balance sheet grew from $900 billion to $4.5 trillion.

The US economy has experienced a gradual recovery since then, but is still experiencing fairly weak annual growth, despite economic data consistently suggesting that the economy is near a break-out. Lockhart suggested there are a number of factors holding back growth, such as declining participation in the labor force.

Today unemployment has fallen to 4.9% and the economy is showing signs of significant progress. However, economists are debating the causes behind weak aggregate demand and growing income inequality.

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