Tags: Fed | Lacker | Lowering | Unemployment | Risks | Inflation

Fed's Lacker: Lowering Unemployment Risks Inflation

Tuesday, 15 Feb 2011 12:46 PM

Federal Reserve Bank of Richmond President Jeffrey Lacker said any effort by the central bank to push unemployment down at a faster rate in the short run could spark inflation.

“So while the analysis in terms of what we can expect in a couple of years in the expansion might be right on target, I am not sure we can push unemployment that much further down or more rapidly without risking inflation picking up,” he said today in a radio interview on “Bloomberg Surveillance” with Tom Keene.

Lacker is among Fed officials who have said they believe the central bank shouldn’t ease more than planned. Policy makers need to take “quite seriously” their commitment to review their purchases of $600 billion in Treasury securities through June, a program aimed at reducing 9 percent unemployment and keeping inflation from slowing, he said last week.

Asked if the “natural rate of unemployment” could be close to 7 percent now, Lacker said there is a difference between the rate in the short and long term. The rate fell to 9 percent last month from as high as 10.1 percent in October 2009. Employers added 36,000 workers last month, the smallest gain since September, as winter weather depressed payrolls, figures from the Labor Department showed.

“The natural rate is sort of a slippery concept,” he said. “There is the rate of unemployment that you could expect an economy to get to as a result of an expansion. But on the other hand there is the rate of unemployment that you really ought to expect in the short run and that you can’t really better without pushing inflation up. I think those are two different things.”

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Federal Reserve Bank of Richmond President Jeffrey Lacker said any effort by the central bank to push unemployment down at a faster rate in the short run could spark inflation. So while the analysis in terms of what we can expect in a couple of years in the expansion might...
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Tuesday, 15 Feb 2011 12:46 PM
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