By Gregor Stuart Hunter 

As global markets reel after the failure of the U.S. health-care bill, a former Federal Reserve official is warning that political issues threaten the central bank's ability to maintain a sustainable recovery.

Former Federal Reserve Bank of Atlanta President Dennis Lockhart said politics could hamstring efforts to achieve long-term growth as the Fed winds down its crisis-era stimulus measures, increases interest rates and starts to shrink its balance sheet.

Mr. Lockhart, who joined the Fed's rate-setting committee in 2007 and remained on the central bank's board for 10 years, said at the Credit Suisse Asian Investor Forum in Hong Kong Monday that he believes the U.S. economy is on a solid footing.

However, he warned that addressing long-term demographic challenges posed by the retiring baby boomer generation will create a drag on economic growth, and the political atmosphere wasn't conducive to considering other measures to improve economic productivity, such as increased skills-based immigration.

"I'm agnostic whether fiscal measures ... tax reforms and reductions and infrastructure spending will be enough to deliver [President Donald Trump's] promised 3%-4% growth," he said. "That set of policies is part of giving the country a chance to grow at a faster rate.

Nevertheless, to counteract demographic trends would be a heavy lift going forward, Mr. Lockhart said.

"If it were up to me, we'd be more open and strategic about immigration and how it could contribute to economic growth," he said.

He cited the effect of Japan's aging population as having created a long-term drag on the country's economy.

"The U.S. is not Japan, and the U.S. has other characteristics, but I do think demographic influence on growth potential is an important consideration in the U.S.," he said. "Demographics influence consumption patterns, savings and investment patterns and even influence real-estate development patterns," he told The Wall Street Journal in an interview.

Recent GDP projections from the Atlanta Fed have pointed to a weaker rate of growth than some of the Fed's other forecasts.

On Friday, the Atlanta Fed's GDPNow tracker forecast growth of 1% for the first quarter, substantially below the Federal Reserve Bank of New York's Staff Nowcast, which forecasts a 3% rate of economic expansion for the same period.

Mr. Lockhart told The Wall Street Journal that neither model was objective, but that when the Atlanta Fed's tracker produced surprises it tended to be a result of inventories or net exports. GDPNow, which was established in 2014 as a means of providing greater public access to the Fed's forecasts and has gained a wide following, also generally had a better chance of accuracy toward the end of the quarter, he added.

A former banker at Citigroup Inc. who began his time at the Federal Reserve just months before the start of the global financial crisis, Mr. Lockhart was present for periods when the central bank was often at the center of political controversy over its efforts to rescue the financial system--fighting off a Congressional effort to "audit the Fed" in 2009--but stressed the Fed should attempt to maintain its independence.

Officials should look to counter politicization of the Fed with communication, transparency and being active about telling its story to government officials and the public, he said.

"There's an intention to maintain healthy conditions," he said. "At the end of the day, both political people and political groups and the Federal Reserve want the same thing for the country."

Federal Reserve officials have recently discussed beginning winding down its balance sheet, which swelled during the financial crisis through bond purchases in an effort to stimulate the economy. Mr. Lockhart said the Fed's balance sheet would likely shrink to around $1 trillion-$2 trillion.

That compares to an average level of approximately $4.1 trillion during 2016.

Mr. Lockhart stepped down from the Fed's rate-setting committee in February this year after a 10-year spell. He intends to take up a fellowship at the John F. Kennedy School of Government at Harvard University focused on infrastructure research.

Write to Gregor Stuart Hunter at gregor.hunter@wsj.com

(END) Dow Jones Newswires

March 27, 2017 09:01 ET (13:01 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.