Federal Reserve Bank of Richmond President Jeffrey Lacker said U.S. economic growth will probably accelerate to about 3 percent next year, warranting an increase in the central bank’s benchmark interest rate.
“The logical time to raise rates is going to be sometime next year,” Lacker, a voting member on the policy-setting Federal Open Market Committee this year, said today in a Bloomberg Television interview. “That’s based on my sense that growth is going to pick up enough by then in order to warrant raising rates to keep inflation pressures under control.”
Fed officials called for additional stimulus only “if the economy lost momentum” or if inflation stays below their 2 percent inflation target, according to minutes of their March 13 meeting released yesterday in Washington. That contrasts with their January meeting minutes, in which some policy makers saw the economy requiring additional action “before long.”
The U.S. economy will probably expand at a pace ranging from 2 percent to 3 percent this year, making more monetary stimulus unnecessary, Lacker said.
“Downside risks have diminished now relative to where they were say four or five months ago, and I think the inflation picture is looking better,” he said. The rising price of gasoline “looks as if it’s going to be a transitory uptick in overall inflation.”
Stocks and commodities tumbled for a second day since the minutes were released. The Standard & Poor’s 500 Index lost 1.1 percent to 1,397.70 at 10:45 a.m. in New York, after losing 0.4 percent yesterday. The S&P GSCI gauge of commodities fell 0.9 percent after retreating 0.4 percent yesterday.
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