Lacker: Fed must not wait too long to raise rates

GREENSBORO, N.C. May 11 (BestGrowthStock) – U.S. policy-makers must
not wait too long to raise interest rates with inflation
unlikely to stay at low levels as the economic recovery picks
up steam, a top Federal Reserve official said on Tuesday.

U.S. inflation has been hovering around 1-2 percent since
early 2009, and some recent readings have been below that
range.

“I believe inflation is unlikely to stay that low. In fact,
the public apparently expects higher inflation in the future,
which suggests that policymakers will need to avoid waiting too
long to raise rates,” Richmond Federal Reserve Bank President
Jeffrey Lacker said in remarks prepared for delivery at a
conference in Greensboro.

The Fed slashed its benchmark interest rate target to near
zero in December 2008 and has kept it there since to aid
economic recovery from a severe recession.

At its last meeting, the U.S. central bank reiterated its
pledge to keep interest rates extraordinarily low for an
extended period.

Lacker, who is not a voting member of the Fed’s
policy-setting Federal Open Market Committee this year, is
generally seen as one of the more “hawkish” top Fed officials
on inflation.

He told the Piedmont-Triad Regional Economic Outlook
conference that the U.S. recovery is “gradually picking up
steam”, driven by consumer spending and business investment in
equipment and software. He said recent data support the idea
that the U.S. economy is on a “sustainable upward trajectory”.

Housing and commercial construction, however, are likely to
lag the recovery, he said.

Lacker said he expects jobs growth to continue, but warned
it will take some time to make “substantial progress reducing
the ranks of the unemployed.”

“We are already seeing evidence that employment is on the
path to steady growth,” Lacker said.

U.S. nonfarm payrolls grew at the fastest pace in four
years in April, data showed last week, as private sector
employers ramped up hiring. The unemployment rate, however,
rose to 9.9 percent as the size of the labor force increased.

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Lacker: Fed must not wait too long to raise rates