QE3 hinges on economy, jobless: Fed's Williams (by Russ Britt)

LOS ANGELES (MarketWatch) -- A new round of quantitative easing would depend on whether the unemployment rate stops coming down and if inflation were to get below the Federal Reserve's desired 2% level, John Williams, president and chief executive of the Fed's San Francisco bank said Tuesday. Speaking at the Milken Institute's Global Conference in Los Angeles, Williams said while the jobless rate would factor into the Fed's decision on QE3, a myriad of economic factors must be weighed before a new round of bond buying takes place. Williams also said that should the economy start to take off, the Fed would keep watch over inflation to make sure it doesn't go far beyond the 2% level. "We have a history of taking the punch bowl away when the party's getting started. We will do that. It's our job."

Fed's Lacker: More easing would raise inflation (by Greg Robb)

WASHINGTON (MarketWatch) - More easing by the Federal Reserve would raise inflation and do little for growth, a key central bank official said Tuesday. The first Fed rate hike may have to come in mid-2013, much sooner than the late-2014 timeframe that the Federal Open Market Committee thinks is likely, Richmond Federal Reserve Bank President Jeffrey Lacker said in an interview at a conference sponsored by Bloomberg. Lacker, who is a voting FOMC member and has dissented from all three policy statements this year, said the Fed must hike rates before inflation pressures are plainly evident. The first rate hike might have to come even though the unemployment rate is above 7%, he said.

Fed's Plosser warns against U.K.-style inflation (by Steve Goldstein)

WASHINGTON (MarketWatch) -- The United States does not want to find itself in the same place as the United Kingdom, where despite high jobless rates, and forecasts from the Bank of England, the country has had elevated inflation for over three years, Philadelphia Fed President Charles Plosser said in front of the CFA Society of San Diego. Plosser was one of four Fed members who spoke in the Golden State on Tuesday. One of the more hawkish members on the Fed who has dissented from the "late 2014" language as to how long ultra-low rates will be kept, Plosser continued to press for a reaction function that will show how policy will adjust to changes in economic conditions. "This will not only enhance transparency but also impose an important discipline on policymaking," he said.

Fed's Lockhart backs staying on sideline (by Greg Robb)

WASHINGTON (MarketWatch) - The Federal Reserve should stay on the sidelines, keeping its power dry in case the economy weakens, said Dennis Lockhart, the president of the Atlanta Federal Reserve Bank on Tuesday in an interview on the CNBC business news cable channel. Lockhart, a voting member of the Federal Open Market Committee, is seen by Fed watchers as a centrist on the central bank, so his views are closely watched. Appearing with Lockhart, Charles Evans, the president of the Chicago Fed bank and not a voting FOMC member this year, again urged the central bank to take more easing steps. He called for the Fed to switch its guidance from late 2014 to an economic trigger of a 7.5% unemployment rate. Lockhart said he was not changing his outlook based on the first quarter's disappointing 2.2% growth rate. Lockhart said he was skeptical that more asset purchases would benefit the economy. "I think there is only so much we can do to stimulate loan demand and to change the risk appetite of the financial system," Lockhart said.