The Federal Reserve might need to raise interest rates more than four times this year if oil prices stabilize, the dollar stops appreciating and inflation surges toward the U.S. central bank’s 2 percent target, a Fed policymaker said on Thursday.
Richmond Federal Reserve President Jeffrey Lacker told a business association in Raleigh, North Carolina, that he was confident inflation, which has been under the Fed’s target for roughly three years, would move higher soon barring an unexpected shock to the economy.
He said the four rate hikes that Fed policymakers generally expect will be needed this year could be off the mark if inflation moved “rapidly” toward 2 percent once oil prices bottomed out and the value of the dollar peaked.
“A more aggressive path would be in order,” Lacker said, adding that he saw early signs of faster wage growth.
But if inflation did not soon move back toward 2 percent following a bottoming out of oil prices and a dollar peak, “a shallower path for interest rates would make sense,” said Lacker, who is not a voting member of the Fed’s rate-setting committee this year.