Atlanta Fed President Dennis Lockhart said Monday the U.S. government's public/private partnership to tackle the toxic asset problem is sufficient.
The plan introduced this morning proposes a private and public partnership that will buy toxic assets and resell them to the public, with all the risk taken by the U.S. government.
In an interview with Reuters, Lockhart said the Federal Reserve's decision last week to buy long-dated U.S. Treasuries was discussed in a healthy debate before the final decision , which was made based on the worsening economic outlook.
He said he was happy with the market reaction following the Fed's announcement, but added he did not consider the negative effect it would have on the U.S. dollar. He said the Treasury purchases will be easier to remove from the Fed's balance sheet once it is time to exit the plan.
Looking ahead, Lockhart said seeing as the Fed is prepared to whittle down its balance sheet he is unconcerned about inflation. However, he said forecasts for a recovery in U.S. economic growth by late 2009 may be too optimistic, and early 2010 is more likely.
He also said personal spending is suffering and unemployment could rise above 9%.
By Megan Ainscow and edited by Ernest Hoffman
©CEP News Ltd. 2009