BALTIMORE — Richmond Federal Reserve Bank President Jeffrey Lacker Friday said it is not certain the absence of major economic data due to the shuttered federal government will delay the central bank's decision regarding when to begin scaling back its $85 billion a month in bond purchases.
"It doesn't help," he acknowledged to reporters following a speech at conference for financial educators. "It'll slow us down a bit."
So could this potential push back the decision by the policymaking Federal Open Market on when to begin tapering asset buys?
"I don't know if it would have an effect one way or another," Lacker, who is not a FOMC voter this year, said. "I can't tell, I don't know. We'll see when we get there (the next FOMC meeting), and I'll see what my colleagues think.
But the Fed, he insisted, "won't be flying blind" in its assessment of the economy.
It will not be a huge impediment for the next couple of weeks as the Fed, for example, does not put too much weight on any one month's jobs number, he added.
Rather, the delayed economic data simply "slows down the improvement in our understanding of current conditions," he said. "It'll slow down the steady march of progress in our understanding of the most recent economic conditions."
The now four-day shutdown, and the resulting lapse in funding, has meant the delay in releasing several key economic indicators produced by the government. The Labor Department postponed issuing the September employment report Friday, and there is a worry than the October report could also be at risk if the White House and House Republicans don't reach a resolution.
Lacker has been a consistent opponent of the Fed's current quantitative easing program, the pace of which the FOMC chose to maintain at its meeting last month. He said even if he had known that a two-week government shutdown was in the offing, "I would have favored tapering in September anyway."
"I don't see it (the shutdown) having a huge impact on my preferences," he said, arguing that in his mind a "substantial improvement" in labor market conditions "has taken place."
"I don't think further stimulus is warranted," he said.
The direct effect of the government shutdown on the economy "is likely to transitory," Lacker declared. He said whatever is subtracted from fourth quarter growth, "there'll probably be a matching offset, on the positive side, in first quarter growth."
"This looks like an economy with 1% employment growth and 2% GDP growth," he said. "I haven't seen anything that contradicts that."
The longer run effect will be felt more in Americans' perceptions regarding the effectiveness of U.S. governing institutions, Lacker said.
In addition to ending the government shutdown, Congress also faces an Oct. 17 deadline to raise the debt ceiling, a failure which is viewed as more catastrophic for the U.S., and world, economy.
"The effects of breaching the debt limit depends on the details of just what choices the Treasury, and/or Congress make about prioritizing payments," Lacker said.
The Fed's messaging has come under fierce criticism since last month's no-taper decision by the FOMC wrong-footed many, and Lacker said the central bank needs to be "careful and thoughtful."
Forward guidance is being provided in a myriad of ways now, he said, so the Fed needs to be sure of "our willingness to follow-through before we provide that forward guidance."
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