RICHMOND - Richmond Federal Reserve President Jeffrey Lacker Friday said he does not believe there is a compelling case for more monetary stimulus in 2012 and argued the Fed could do little to boost employment or relieve pressures in the housing market.
Speaking to reporters after a speech in Richmond, Lacker said the lackluster economic recovery in 2011 showed that quantitative easing had a poor track record in boosting growth and was unlikely to have any greater positive effect in the coming year.
"Given the data I've seen, I'm still where I was a month or two ago, when I said I didn't see a compelling case for further stimulus," Lacker said. "The record over the last year and a half is that stimulus raised inflation and didn't do much for growth on a sustained basis. I think if we did it again, that's what would happen."
Lacker, who will join the Federal Open Market Committee as a voting member at the Jan. 24-25 meeting, also said there is little the Fed can do to boost job growth over the coming year. He said the Fed should evaluate its maximum employment target in light of recent economic shocks that have taken place over the last decade.
"Our progress against the maximum employment component of our mandate needs to be evaluated, with a realistic sense of what employment is actually achievable now," Lacker said. "I don't think it makes sense to hold us accountable for the employment that might have been achieved, had none of the shocks of the last 10 years occurred.
"Those shocks have occurred, we can't do anything about them, we can't undo them. We need to think about it in terms of what employment could be achieved given what we've been through," Lacker said.
Lacker acknowledged there is a role for fiscal policy to play in boosting employment and growth, principally by relieving uncertainty over policy, but he argued the government's role should not be overstated.
"I don't see a way (monetary) policy could achieve much more rapid employment growth than we have now," Lacker said. "I think there is the capacity for (fiscal) policy to improve in a way that strengthens the growth outlook ... but it's a lot of little things."
Lacker similarly argued that there is little fiscal policy can do to relieve an "understandable" downturn in the housing market, and the Fed itself should stay out of housing policy altogether.
"I don't think we should be targeting a specific market, even a market as dear to Americans hearts as the housing market," Lacker said. "I don't think it's our role to be intervening ourselves in the housing market.
"The condition of the housing market looks understandable, and it's not clear that there's a lot of easy fixes out there," he said.
Earlier, in a speech to the Richmond chapter of the Risk Management Association, Lacker said there remains "relatively persistent impediments holding back economic expansion in the U.S." and the housing crisis "tops the list" of those impediments.
Lacker repeated his forecast for 2012 growth at a "moderate pace" of 2.0% to 2.5%, and inflation at "close to" 2.0%. The chief risk to the downside was a severe downturn in Europe, while on the upside there was a "chance" consumer confidence could recover more quickly than expected over the year.
Taking questions from the audience, Lacker argued the Fed "broke from the past" by weighing into fiscal policy with last week's white paper on housing, and said he was not sure there was a "convincing case" for the Fed's housing prescriptions.
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