WASHINGTON - Richmond Federal Reserve Bank President Jeffrey Lacker Monday described U.S. second quarter economic data as "pretty tepid," and said the economy is definitely experiencing a slowdown.

"I tend to think some of the slowdown's real, I think that a cloud hanging over Europe is having an effect on export demand, manufacturing demand and that's percolating through the economy slowly," he said in an interview on Bloomberg Radio.

However, "I don't think this is fatal, I don't think this is tipping us into a recession right now," he added.

Rather the U.S. economy is in a situation where growth will likely fluctuate between "somewhat satisfactory and disappointing," Lacker said.

Still, Lacker -- a voter on the Federal Open Market Committee this year -- does not believe additional monetary stimulus is warranted.

"Things like the [Operation] Twist or QE are unlikely to have a substantial effect," he said, and if they do, "it's more likely to be on inflation than growth."

The FOMC has said current economic conditions will require interest rates remaining at historically low levels until late 2014. Lacker warned, however, that this statement should not be taken as a pledge and that the central bank could hike sooner or later depending on incoming data.

Lacker also said he has revised his forecast for the first increase of the fed funds rate from mid-2013 -- back in January -- to an expectation of late 2013 now.

It is also "likely true" that other members of the FOMC are also pushing back their forecasts, he said.

Lacker warned that the still high unemployment rate will not be the "primary determinant" of when the Fed begins to raise rates.

"If we have sustained growth at 3% or more, and it looks it would be continued, I think we'd need to start raising rates," he said. "And that could happen even before the unemployment rate falls substantially."

Lacker argued that the U.S. economy is "pretty close" to maximum employment right now and he does not think there is much more monetary policy could do.

Additional asset purchases by the Fed would just further complicate its exit strategy, he said.

Lacker's fellow voter on the FOMC, San Francisco Fed chief John Williams, warned in a speech in Idaho Monday that Europe remains the main wild card for the U.S., and that a severe enough spillover could have dire consequences for the domestic financial system.

Lacker, however, said the financial contagion is would be minimal and any spillover more likely to be seen in short-term commercial paper markets and impact money market mutual funds "substantially."

Despite his warnings, Lacker said inflation in the U.S. is in "a good place right now," and inflation expectations have been "awfully" stable.

"I don't see an imminent break out of inflation on the horizon on the upside," he said.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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