By Mark Felsenthal
WASHINGTON (Reuters) - Top Federal Reserve officials on Thursday showed little urgency about softening the central bank's promise to hold rates low for a long time, suggesting that vow will be left unchanged after the Fed's meeting at the end of the month.
The Fed has held benchmark borrowing costs near zero to support the economy as it recovers from the worst downturn in decades. It has promised to hold rates exceptionally low for an extended period to provide an extra measure of encouragement for borrowing.
However, as the economy shows signs of recovery, notably the addition of 162,000 jobs in March, financial markets are watching for any evidence that policy-makers are ready to ease their commitment to an extended period of low rates. Such a switch would be seen as a precursor to tightening financial conditions, though how soon is also a matter of speculation.
Fed officials who spoke on Thursday appeared inclined to agree with Fed Chairman Ben Bernanke, who told Congress earlier this week that the central bank expects very low rates will be needed for an extended period, but that if conditions improve or inflation rises, the Fed would respond.
"At some point in the future, we're going to need to begin to adjust the language, to begin to see changes in the substance of the policy," Atlanta Fed Bank President Dennis Lockhart told reporters after delivering a speech to a business group in Pensacola, Florida.
"The substance of the language, I continue to support," he said, adding he was not calling for any immediate changes to it. Lockhart is not a voter on the Fed's policy-setting Federal Open Market Committee this year.
IT ALL "DEPENDS UPON THE ECONOMY"
Another senior Fed official, Richmond Fed Bank chief Jeffrey Lacker, said earlier this week that recent signs of recovery have led him to think that a muting of the extended period language should come "sooner rather than later."
However, Lacker said on Thursday he doesn't see any pressing need to remove the language from the Fed statement yet.
"I'm comfortable with interest rates where they are now," Lacker, also a non-voter, told reporters at a Fed symposium on credit markets in Charlotte, North Carolina.
The Richmond Fed president said that once the Fed -- the U.S. central bank -- removes the extended period language, it would not necessarily mean that it will raise interest rates shortly thereafter.
"There's no set period of meetings or months" before the Fed would raise borrowing costs, he said.
St. Louis Fed Bank President James Bullard said the "extended period" promise should reflect more "conditionality" on the state of the economy, a top official of the U.S. central bank said on Thursday.
Bullard, an FOMC voter this year, said the pledge should not be linked to a specific time frame.
"Everything depends on economic performance, and we'd like to be able to convey that," Bullard told reporters after a speech to the Levy Economics Institute in New York.
A fourth Fed president who spoke on Thursday, Dallas Fed Bank President Richard Fisher, vowed at a Johns Hopkins University conference that the Fed would not print money to fund U.S. budget deficits, but he did not directly address the outlook for monetary policy.
Fisher is currently a non-voting member of the FOMC.
(With additional reporting by Joe Rauch in Charlotte, North Carolina; Kristina Cooke and Emily Flitter in New York, and Pedro da Costa in Pensacola, Florida; Editing by Jan Paschal)
