Federal Reserve Bank of Richmond President Jeffrey Lacker said the U.S. central bank may need to increase the benchmark interest rate by the middle of next year to curb inflation as the economic expansion gains strength.
“My current assessment is that an increase in interest rates is likely to be necessary by mid-2013 in order to prevent the emergence of inflationary pressures,” Lacker said today in a statement on the regional bank’s website.
The Richmond Fed chief cast the only vote against a Federal Open Market Committee statement on April 25 that economic conditions will warrant keeping the benchmark interest rate at “exceptionally low levels” at least through late 2014.
Lacker has voted against all three FOMC policy statements this year as Fed officials weigh when they will need to raise the main interest rate from near zero. Lacker said in a March 16 statement the central bank will probably need to tighten next year, and on Jan. 27 said he didn’t see a compelling case for more stimulus.
U.S. economic growth will probably accelerate to about 3 percent next year, the Richmond Fed chief said in an April 4 Bloomberg Television interview.
Fed policy makers on April 25 affirmed their 2014 interest rate plan after a two-day meeting in Washington. They refrained from new actions to lower borrowing costs and said that they expect growth to gradually accelerate. The committee also said the jobless rate isn’t declining fast enough.
Officials lowered their forecast for unemployment, which they project will average 7.8 percent to 8 percent in the final three months of this year, according to central tendency estimates, which exclude the three highest and three lowest projections. That’s down from a forecast of 8.2 percent to 8.5 percent in January.
Seven of 17 Fed officials expect borrowing costs to remain below 1 percent at the end of 2014, down from nine in January.
Ten officials vote on the policy statement, while the interest-rate and economic projections reflect the views of all 17 FOMC participants.
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