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Richmond Federal Reserve president Jeffrey Lacker weighs in on the economic recovery and his outlook for inflation.
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-- -- to join us which we appreciate thank you Peter.
And -- the next guest was actually the loan fed dissenter.
At the at the last fed meeting saying it no more no more stimulus from the Federal Reserve talking about the Richmond fed president Jeffrey -- he's with Peter Barnes now in Washington.
This is an exclusive interview -- a -- of that's right -- colleges continue that conversation with -- -- who is a voting member of the FOMC has been the dissenter.
All year long at the Fed and let's start off with the announcement last Wednesday president wacker.
The announcement included a downgrade of the economic outlook and a lot of analysts that I get research notes from said well.
This means that another round of quantitative easing is coming is it.
Nothing's ever a foregone conclusion we take everything -- meeting -- at a time minutes it's gonna depend on how the data comes out.
-- growth is clearly we didn't the last couple of months.
Tom but if you look back over the last couple years it looks like this recovery is one it's gonna be characterized by swings between stronger growth and much more disappointing levels of growth.
But we saw in the statement it sounded just very kind of -- -- the committee anticipates that the unemployment rate will decline only slowly towards levels that it judges to be consistent with its dual mandate.
And it sounds like they're setting the table for another round of QE.
Three maybe not what your vote -- Well and it will take it is it comes I think monetary policy doesn't have a lot of capability right now.
For really enhancing the growth we were seeing on the economy I think the impediments to growth.
Are things did monetary policy is really not that capable of offsetting.
I think we're going through we have a major fiscal adjustment -- United States and I think that.
The size of that the dimensions of that -- -- it's gonna land who it's gonna effect is very uncertain and I think that uncertainty.
Is having -- detectable effect in inhibiting growth -- now.
But but but you so so you don't think that an additional stimulus QE3.
Could.
Could be effective if the Fed Chairman Ben Bernanke said at his press conference hey we're not out of ammunition we're not out of bullets.
I think it can be effective for example and helping to bring down mortgage rates even further which might help the housing market I think.
Monetary -- the stimulus can be effective in raising inflation come and that's what we know from centuries of economics to be true.
Whether it -- -- or not depends on the circumstances depends on the situation.
I don't think we're in a situation where would have a a meaningful effect on stimulating growth.
Offer beyond the transitory period and I think that further stimulus at this point would most likely just raise inflation.
Inflation's running around 2% that's -- stated objective.
I don't think we want to increase it from here.
Well yeah.
You don't wanna see -- he wanted to average around 2%.
We had a below 2% for awhile it's come up to 2%.
Now we've got a little bit a softness on the inflation front now with oil and energy prices coming down bit.
Our history of that is that they tend to be transitory I think hit -- headed back to 2% or what then what should the Fed be doing right now as far as policy goes what -- been raising interest rates right now -- or what.
Now I'm comfortable with you know abroad amount of monetary stimulus out there in terms of our stance I think we're okay no I don't think we have to withdraw.
Monetary stimulus right now I don't think we have to begin exiting radio.
-- but I think we're gonna have to try and do it in a way.
-- you have to choose the right time so that we do it to prevent inflation from -- we will wait until inflation goes up.
At this point it'll be too late so raise rates sooner rather than later when my sense is big -- -- over the course of this year Vietnam we were likely to need to raise rates sometime in the 2013.
Time horizon.
It may be late 2013.
Is a little more appropriate.
Now with the growth outlook weakening bit.
I think we're probably have to raise rates next year -- -- but it's gonna depend on the data that's not a promise and finally you haven't closed the door entirely to an additional round of quantitative easing if you see.
Crisis starting to fall.
Inflation and -- if inflation fell in a sustained way and we needed to boost inflation to get impacted -- story target.
I would favor monetary stimulus no question about it.
Alright Jeffrey lacquer there Richmond Federal Reserve -- thanks for joining us live -- -- business and -- we're gonna continue this discussion.
With more questions about the economy headwinds housing.
Europe.
In order to post that exclusively to our website later this afternoon a couple cents get foxbusiness.com.
Peter -- -- thank you very much and also today.
