Lacker: Need to Withdraw Stimulus at 'Appropriate Time'

Monetary stimulus must be withdrawn at the "appropriate time" to keep inflation in check, Federal Reserve Bank of Richmond President Jeffrey Lacker said Tuesday.

"Inflation, meanwhile, remains well-behaved, but maintaining that good performance will require withdrawing monetary stimulus at an appropriate time to prevent the emergence of inflationary pressures," he said, according to prepared text released by the Fed.

Most Federal Open Market Committee participants see the federal funds rate rising next year, Lacker noted. "It's also worth pointing out that most participants expect inflation at or below the FOMC's 2 percent target next year. This is consistent with the FOMC's past practice of raising rates pre-emptively, before undesirable inflation pressures actually emerge."

Although, he noted, inflation can "run hot or cold for several months at a time," he sees a bottoming out and expects inflation to move toward 2%. "I expect that firming trend to continue this year."

As for GDP growth, Lacker sees it continuing to average between 2% and 2.5%.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER