Federal Reserve policymakers will continue to weigh reductions to a bond-buying program aimed at stimulating growth because improvements in the job market are meeting the central bank’s objectives, Richmond Fed President Jeffrey Lacker said.
“We’ve seen a substantial improvement in a variety of indicators of labor market conditions, including the unemployment rate and the level of employment,” Lacker said at a Maryland Bankers Association forum in Baltimore.
“So it made sense to initiate the process of bringing the program to a close. I expect further reductions in the pace of purchases to be under consideration at upcoming meetings.”
Lacker is a non-voting member this year of the Federal Open Market Committee, which announced Dec. 18 that it will cut to $75 billion its monthly asset-purchase program starting this month, from $85 billion.
In his prepared remarks, Lacker said he is predicting growth this year of about 2 percent, a level that’s “slower than in the past,” even as data at the end of 2013 showed the potential for an acceleration.
“The pickup in growth late last year is certainly a welcome development, and it may well be a harbinger of stronger growth ahead,” he said. “But experience with similar growth spurts in the recent past suggests that it is too soon to make that call.”
While consumer spending “seems to have surged early in the fourth quarter” last year, Lacker cited “persistent cautiousness” among consumers and said businesses “also appear to be quite reticent to hire and invest.” The federal government’s recent budget agreement is “welcome relief,” and lower odds of another fiscal showdown “may aid growth,” he said.
Lacker said he expects inflation that’s averaged 0.9 percent over the past 12 months will move back toward 2 percent in the next year or two, cautioning that “this is not a certainty” and the Fed will monitor it closely.
Lacker, 58, has been president of the Richmond Fed since August 2004. His turn in a rotation of voting members on the policy-setting FOMC comes in 2015.
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