Richmond Fed President Lacker Attacks Rate Policy

Richmond Fed President Lacker went public with his objections to the Federal Reserve’s decision to keep rates low through 2014. He issued this statement:

“The Federal Open Market Committee released a statement following its April 24–25, 2012, meeting stating that the Committee currently anticipates that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. I dissented because I do not believe economic conditions are likely to warrant an exceptionally low federal funds rate for this length of time. 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 sees the cup of the US economy as more than half full. His beliefs are about to be tested, at least short term. Unemployment numbers are about to be issued for April. Early data on inventories suggest a slowdown in GDP expansion. And, almost every economist with a eye on Europe believes the financial situation, and the region’s buying power, will deteriorate further over the near and mid-term.