Fed’s Lacker Calls For Rate Hikes to Keep Inflation Under Control

Richmond Federal Reserve President Jeffrey Lacker on Tuesday said there was a strong case for raising interest rates, arguing that borrowing costs might need to rise significantly to keep inflation under control.

The Fed last raised its benchmark federal funds rate in December and Lacker, who is not a voting member of the Fed’s rate-setting committee this year but participates in its discussions, has been pressing in recent months for further hikes.

“Pre-emptive increases in the federal funds rate are likely to play a critical role in maintaining the stability of inflation,” Lacker said in prepared remarks at a conference on the economic outlook.

The Fed’s current target range for the rate is between 0.25 percent and 0.5 percent and most policymakers expect to raise the range by a quarter point before the end of 2016.

But Lacker argued economic history suggests the rate should be about 1.5 percentage point higher than its current level given the current rates of joblessness and inflation.

“This is the basis for the strong case I have articulated for raising our interest rate above its current low level,” he said.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza