Richmond Federal Reserve Bank president Jeffrey Lacker Tuesday night said the Fed needs to be careful not to allow inflation to accelerate as it uses new and old tools to withdraw its monetary stimulus.

In his prepared remarks and in answering questions from the audience, Lacker said the Fed is being careful to get “get behind the curve on inflation,” and is on the lookout for sudden spikes in oil prices and other factors.

“I think we need to be a little more vigilant than we were in the last expansion,” he said, particularly about commodities prices. It’s easy, Lacker added, to be lulled by futures prices only to find repeated upward spikes add up to an accelerating inflation rate.

He said the time has not yet arrived for the Fed to be debating whether to contemplate selling assets like mortgage-backed securities, and he joked the Fed is not engaging in any “secret purchases” that he is aware of.

Talking to reporters, Lacker said the most recent favorable economic data appeared to argue against much more use of the “extended period” language the Federal Open Market Committee has been using to describe the time until it raises rates.

Lacker’s comfort level with that language, he said, has been “diminished,” and he could see dropping it sooner rather than later.

In his prepared remarks, Lacker warned that Congress must consider raising taxes or cutting spending, and that meanwhile the Fed is not going to help out by eroding the government’s debt through inflation.

— Market News International

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