Fed’s Lacker: Don’t Wait Too Long to Raise Rates

With public sentiment expecting higher inflation, the Fed must not wait “too long” to raise the federal funds rate target, Federal Reserve Bank of Richmond President Jeffrey Lacker said yesterday.

While inflation has been between 1% and 2% since early 2009, “I believe inflation is unlikely to stay that low,” Lacker told a Piedmont-Triad Economic Development Summit, according to prepared text of his remarks from the Fed. “The public apparently expects higher inflation in the future, which suggests that policymakers will need to be careful to avoid waiting too long to raise rates.”

The U.S. economy is “recovering from a very severe recession,” with indicators suggesting economic growth since the middle of last year, he said. “While the beginning of a recovery does mark the return of growth in overall economic activity, there are always economic sectors where weakness persists.”

Lacker noted that the struggling housing and labor markets have provided glimmers of positive news recently.

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