Bloomberg News

Lacker Says Fed Is ‘Really Far’ From Need for More Stimulus

March 30, 2012

Federal Reserve Bank of Richmond President Jeffrey Lacker said he opposes any additional asset- purchase program with the U.S. economy recovering and inflation close to the Fed’s target.

“Easing moves are part of the arsenal, part of the toolkit, and there are conditions that one could conceive of when you would pull them out and enact them,” Lacker said in an interview on CNBC television from Charlotte, North Carolina. “I think we are really far from that right now.”

Lacker’s comments reflect his decision to dissent twice this year from the Federal Open Market Committee’s statements that subdued inflation and economic slack will probably warrant exceptionally low rates through late 2014. Fed officials are debating the need for more easing even after the policy group upgraded its assessment of the economy at its March 13 meeting following employment gains.

“If we get growth about what I am expecting,” which he said was 2 percent to 3 percent this year, “I don’t see where the rationale for further easing is going to come from,” Lacker said.

The Richmond Fed president said he was encouraged by the increase in job gains over the past few months, which he said partly reflected a drop in labor productivity. “The job market seems to be gradually healing,” and unemployment may drop below 8 percent next year, he said.

“We are in reasonably good shape” on inflation, which may be close to the Fed’s 2 percent target this year, he said.

The Richmond Fed leader repeated that he believed an increase in interest rates is likely to be necessary some time in 2013. Chairman Ben S. Bernanke has been unable to forge unanimity on the committee since June, as the panel’s decisions drew objection from policy makers both in favor and opposed to more stimulus.

Lacker, 56, votes on monetary policy in 2012 as part of the rotation among Fed bank presidents. He is a former head of research at the Richmond Fed and became president of the bank in August 2004.

To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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