Richmond Federal Reserve Bank President Jeffrey Lacker Friday explained his disagreement with the belief held by his fellow monetary policymakers that the federal funds rate will need to be kept zero through late 2014 or longer.
Lacker, the lone dissenter on the Fed's policymaking Federal Open Market Committee which left accommodative monetary policy in place Wednesday but did not take additional easing steps, also said there is too much uncertainty about the economic outlook to warrant the Fed continuing to publicly anticipate the benchmark rate likely will have to be kept near zero for another two years or more.
And he said he would prefer to let FOMC participants' funds rate forecasts, updated quarterly in the Committee's Summary of Economic Projections, suffice, rather than have the FOMC issue a calendarized "forward guidance" statement in the policy statement issued after each FOMC meeting.
The FOMC refrained from launching a third round of quantitative easing or other new stimulative measures two days ago, but kept the federal funds rate target between zero and 25 basis points and reiterated its expectation that "economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."
The FOMC also continued its maturity extension program ("Operation Twist") and securities reinvestment policy.
In its statement Wednesday, the FOMC said Lacker dissented because he "preferred to omit the description of the time period over which economic conditions are likely to warrant an exceptionally low level of the federal funds rate." It was his fifth dissent of the year.
Lacker said in a statement released early Friday that he "dissented because I believe that exceptionally low federal funds rates are not likely to be warranted for this length of time."
"My assessment is that significant uncertainty regarding the evolution of economic conditions over the next few years makes the future path of interest rates difficult to forecast," he added.
"The Committee's statement implies more confidence about the persistence of low interest rates than I believe is justified by the current outlook," Lacker said.
"I also believe that information about Committee participants' views regarding the future path of interest rates would be better provided by the Committee's Summary of Economic Projections."
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