Lacker ist auch so ein typischer -in-die-suppe-spucker ... Bush wird ihn demnächst nach alaska verbannen
Lacker:Rate Hikes Needed If Inflation Stays Where It Is
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Federal Reserve Bank of Richmond President Jeffrey Lacker on Wednesday warned against allowing inflation to remain at current elevated levels, saying it could feed into price expectations.
"Should inflation persist around the current elevated level, firmer monetary policy would be required to restore price stability," Lacker said in prepared remarks to the District of Columbia Chamber of Commerce.
Lacker was relatively upbeat about the economic outlook, saying that while the drag from housing is "significant" and may lead to "below average" growth "for a time," the economy remains supported by "reasonably good" consumer and business spending.
Lacker was the sole dissenter in the Fed's last two decisions to keep the benchmark federal funds rate unchanged at 5.25%. Each time, Lacker preferred an increase in the fed funds rate of 25 basis points.
Prior to the August Fed meeting, the central bank had raised rates 17-straight times in 25-basis-point increments.
Lacker's comments Wednesday suggest his dissenting views haven't changed since the last Federal Open Market Committee meeting on Sept. 20.
The FOMC meets Oct. 24-25, and is widely expected to hold rates steady again.
Underlying inflation measured by the personal consumption expenditures price index excluding food and energy, the Fed's preferred gauge, is running at a 2.5% annual rate, Lacker noted, which is above the Fed's understood 1% to 2% comfort zone.
Lacker prefers that inflation stay near the midpoint of that range, 1.5%.
He added that inflation is "likely to moderate" in the near term but "there is some uncertainty as to how long that will take."
Thus, the Fed must stay "quite vigilant" on inflation, Lacker said, since if inflation stays above target too long, "inflation expectations could become centered around the higher rate."
Lacker said inflation expectation measures suggest market participants don't foresee a quick retreat in core inflation.
On the housing sector, which the Fed has cited as a main drag on the economy," Lacker said that while "some further retrenchment" is likely, he doesn't expect a "catastrophic collapse" since job and income fundamentals remain sound.
And given the "reasonably good" outlook for consumer and business spending, the economy should transition to its trend rate of growth of around 3%, he said.
Turning to labor markets, Lacker said that while the 118,000 average monthly pace of job creation over the past six months "sounds low," it's actually in line with the trend growth needed to absorb new entrants in the labor force.