In an appearance on CNBC this morning, Richmond Federal Reserve Bank President Jeffrey Lacker touched on a wide range of issues and projected a much rosier picture of the US economy during the next year or so. For example, Lacker does not think that interest rates will need to be held at the current near-zero level through 2014. In his opinion, by the middle of next year the US economy should be in considerably better shape and interest rate hikes might be needed to keep inflation in check.
Lacker also stated that he does not “see where the rationale for further [quantitative] easing is going to come from.” In his view, the unemployment rate could fall below 8% by mid-2013 and core inflation should stay around 2% (not including energy costs).
Lacker refused to be drawn to predict energy prices. That was an awfully smart move on his part.