Richmond Federal Reserve Bank president Jeffrey Lacker Friday told CNBC he thinks core inflation stabilizes or goes up from now on and that intentions of some firms to raise prices later this year is "worrying."
He stopped short of saying he would favor ending the Quantitive Easing 2 policy early but said continuing growth has been enough to "tilt the case" further against its continuation. It is at this recovering phase of the business cycle that history has shown inflation tends to accelerate, according to Lacker.
On the oil price surge, "I don't think it's going to derail the recovery," he said. "Luckily we have a lot of experience, a lot of track record, a lot of data to process on this because we've been through this before …. I think we're going to get through this without a big burst of inflation."
On inflation in general, commodity price spikes do present a risk that bears watching though, Lacker said, although inflation expectations appear to be well anchored "right now, hanging in around 2%."
"I think we've seen the bottom of core inflation," he said. "I think it's going to stabilize or head up from here."
Lacker — who will be a Federal Open Market Committee voter next year — said he doesn't know if he would vote at the next FOMC meeting to cut QE2 short. "I'll look at all the data I see when I get in the meeting," he said.
But he said at this point of the business cycle, "we need to withdraw monetary policy at some point," getting the timing "just right."
He noted that the FOMC has said "we are re-examining it at every single meeting and I think that's warranted." Lacker added: "To my mind it was a close call to begin with, and since November, when we instituted the program, the improvement in the growth outlook has been noticeable enough to tilt the case further against the QE2, and so I think it deserve reexamination at every meeting."
