Lacker predicts ‘moderate’ U.S. growth

FREDERICK, Md. – Federal Reserve Bank of Richmond President Jeffrey Lacker, 51, told a gathering here that the U.S. growth rate will rebound this year to a “moderate” pace, leaving inflation as the greatest risk to the national economy, according to Bloomberg News.
In the first quarter, the economy grew at an annual rate of 0.6 percent, the slowest in more than four years. But looking ahead, Lacker said – echoing his May 22 comments in New York (READ MORE) – “The housing market is likely to find a bottom some time this year and no longer be a drag on top-line growth, business investment will pick up, and consumer spending will remain healthy.”
Meanwhile, personal consumption expenditures excluding food and energy (the Fed’s preferred measure of inflation) continue to equal or exceed the 2-percent limit preferred by Lacker and most Fed policymakers.
“Given the repeated swings we’ve seen, it is difficult to pick out a definite trend. … All one can say with confidence is that year-over-year core inflation is now fluctuating around 2.25 percent,” Lacker said. A non-voting member this year of the Federal Open Market Committee, whose duties rotate among Fed officials, he last year cast the sole vote in favor of raising interest rates at four FOMC meetings in a row.
Lacker added that the Fed “ought to be held accountable for overall inflation,” including volatile food and energy costs, which also affect consumers’ purchasing power. Energy and commodity prices were also identified as risks by Cleveland Fed President Sandra Pianalto, according to Bloomberg News. Pianalto who said today in Frankfurt that policy makers “cannot afford to be complacent.”