With various labor market indicators showing improvement, Federal Reserve Bank of Richmond President Jeffrey Lacker said he expects the Federal Open Market Committee will continue to reduce its asset purchases at future meetings.
"Since the [asset purchase] program began in late 2012, we've seen a substantial improvement in a variety of indicators of labor market conditions, including the unemployment rate and the level of employment," Lacker said in prepared remarks to be delivered at Shenandoah University on Tuesday. "So it made sense to initiate the process of bringing the program to a close. I expect to see further reductions in the pace of purchases at upcoming meetings."
Lacker called the faster economic growth late in 2013 "a welcome development," and said it could be "a harbinger of stronger growth ahead," although "it is too soon to make that call." He suggested growth may slow to 2% this year. "Growth has been disappointing relative to our experience during the period of the Great Moderation, and growth may continue at a rate that is slower than in the past. But our economy is by no means stagnating; productivity is rising, incomes are growing and innovation is occurring."
Inflation, he said, "will move back toward 2 percent over the next year or two, in part because measures of expected inflation remain well-contained. This is not a certainty, however, and I believe the FOMC will want to watch this closely."
