QE3 will work under the right circumstances. But I don’t believe such circumstances prevail at this time

“As popular as it might be in some quarters to rule out further LSAPs (QE3, as it is known), I do not think this option can be taken off the table. QE3 will work under the right circumstances. But I don’t believe such circumstances prevail at this time.”

The above commentary was from a speech this morning by Dennis Lockhart – President of the Federal Reserve Bank of Atlanta – at the Institute of Regulation & Risk in Tokyo, Japan. There, Lockhart argued that although the U.S. economy is in a “phase…when sustained monetary accommodation is warranted to keep the U.S. economic recovery going,” the current environment does not warrant a third round of money printing, at least not yet.

Additional highlights from the Atlanta Fed President’s speech included:
“Circumstances today in the United States call for continued measured efforts to quicken the pace of recovery and shrink unemployment, while keeping inflation controlled and close to the FOMC’s official target of 2 percent. Those efforts for the time being should fall in the realm of communications. Current economic data continue to be a mix of positives and negatives. Consumer activity is continuing to grow, and manufacturing is expanding. At the same time, we’ve seen a recent slowdown in business investment, and the pace of job creation has weakened.”

“There are larger-than-normal risks to my outlook, however. Chief among them is the potential for broad spillover from Europe to the U.S. and global economy resulting from financial system disruption as well as further economic slowdown.”