Fed should be patient, keep trimming US stimulus: Lockhart

WASHINGTON, Mar 7   (Reuters) :  It could be another two months before the US Federal Reserve can determine whether recent weak economic data is truly weather-related or something more permanent, so policymakers should keep trimming their bond-buying stimulus, a top Fed official said on Thursday.

In an interview, Atlanta Fed President Dennis Lockhart said flatly that the central bank should keep reducing its policy accommodation even if the February jobs report on Friday falls short of expectations, making for three straight months of sub-par hiring in the world's largest economy.

"In my mind, unless we really fall off track in the economy pretty dramatically, I think the tapering program should proceed," Lockhart told Reuters, adding that he has "modest" expectations for the government's nonfarm payrolls report.

The Labor Department is expected to report on Friday that US businesses added 149,000 jobs in February and the unemployment rate remained unchanged at 6.6 per cent, according to a Reuters survey of economists.

That would be an improvement from the prior two months, in which the economy added fewer than 200,000 jobs combined. A weak labor market, along with soft manufacturing and retail sales data, has signaled that the US economic recovery lost some momentum in the early part of 2014.

Lockhart attributed the weak data to the severe winter weather that has gripped much of the United States and issued a word of caution to anyone expecting the Fed to abruptly back off a plan to wind down its bond purchases by later this year.

"Looking at this as a quarter-by-quarter measurement of economic activity and strength, we'll be into the second quarter before we can even complete the call on the first quarter," he said before giving a lecture at Georgetown University, where he taught international business before taking the reins at the Atlanta Fed seven years ago.

"And we'll certainly be in the second quarter before we can become confident that it was an anomaly as a quarter because of weather," he added.

In his lecture, Lockhart said activity could tick up in the second quarter of the year and that he had an optimistic view of the outlook, tipping growth to move back toward a 3 per cent annual rate after a soft first quarter.

Answering questions later, he said it would be a concern for policymakers if non-farm payrolls were to come in below 100,000, but added that he personally would not over-react to a low number.

Lockhart, who does not have a vote this year on the Fed's policy-setting panel but participates in its discussions, is considered to be near the center of the central bank's policy spectrum, and his comments often reflect the views of the core decision-makers.