The Federal Open Market Committee may need to raise the fed funds rate target “before a vigorous recovery has had time to establish itself” in order to prevent inflation, Federal Reserve Bank of Richmond president Jeffrey Lacker said yesterday.

The economic outlook is improving, Lacker told the Danville Chamber of Commerce, according to prepared remarks released by the Fed. “We’ve endured the worst downturn that the economy has experienced in most of our lifetimes, and conditions remain distressed in many industries and localities,” he said. “Yet the economy appears to have leveled out and I believe we can look forward to better times ahead.”

While praising the “Cash for Clunkers” program for jump-starting car sales, Lacker said: “I believe that even without the program we would have seen some additional firming of auto sales this year.”

The bad news is “the recovery is likely to be slow and uneven for some time,” he said. “We obviously have major difficulties to overcome before we can feel really good about the economy.”

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