Hawkish Lacker

March 31st, 2015 7:58 am | by John Jansen |

Via Bloomberg:

Fed’s Lacker Sees ‘Strong’ Case to Raise Rates at June Meeting
2015-03-31 11:53:48.660 GMT

By Jeff Kearns
(Bloomberg) — Federal Reserve Bank of Richmond President
Jeffrey Lacker said the main interest rate should be raised in
June amid a stronger job market, consumer-spending growth and
inflation heading back toward the Fed’s target.
“A strong case can be made that the federal funds rate
should be higher than it is now,” Lacker, who votes on policy
this year, said Tuesday in the text of remarks at the district
bank in Virginia. “Unless incoming economic reports diverge
substantially from projections, the case for raising rates will
remain strong at the June meeting.”
Lacker said consumer spending has gathered momentum and
business investment should contribute to growth this year,
putting economic growth in the 2 percent to 2.5 percent range.
In his last economic outlook speech in January, he said growth
in 2015 may be around 2.25 percent, while “there are reasons to
believe” it could be as high as 3 percent.
Policy makers opened the door March 18 to an interest-rate
increase as soon as June, while also indicating in their
forecasts it will go slow once it gets started. Fed Chair Janet
Yellen said last week interest rates will probably be raised in
2015 and made the case for a cautious approach to subsequent
increases that will keep borrowing costs low for years to come.
Officials this month also cut their median estimate for the
main rate at the end of 2015 to 0.625 percent, compared with
1.125 percent in December forecasts. Since 2008, the Fed has
held rates near zero and more than quadrupled its balance sheet
to about $4.5 trillion in three rounds of asset purchases.

Supplying Stimulus

Even after several rate increases, the Fed will still be
supplying “quite a bit of stimulus” to the economy for a
“considerable period,” Lacker said.  He said inflation will
rebound as the dollar peaks and energy prices start to rally.
Lacker said inflation is “likely to begin moving back
toward 2 percent this year” as the decline in energy prices
proves transitory. The Fed’s preferred price gauge rose 0.3
percent in February from a year earlier and has been below the
Fed’s 2 percent objective for almost three years.
Sluggishness in the housing market is unlikely to change
quickly, and homebuilding probably won’t be a “major
contributor” to economic growth this year, Lacker said.
Lacker, 59, spoke on Tuesday to a forum of regional
business leaders. He became president of the Richmond Fed in
2004 after five years as director of the regional bank’s
research department.

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  1. 2 Responses to “Hawkish Lacker”

  2. By Paul Mathis on Mar 31, 2015 | Reply

    Is Lacker the Baghdad Bob of the Fed? Inflation is falling along with consumer spending and business investment virtually nil. His GDP projections are nonsense.

  3. By John Jansen on Apr 1, 2015 | Reply

    I wish I had written that “Baghdad Bob” line.

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