Federal Reserve Bank of Richmond President Jeffrey Lacker, an outspoken anti-inflation hawk who dissented in favor of higher interest rates at the Fed’s policy meeting on Thursday, said failing to tighten had raised the risk of “adverse outcomes” for the nation.
“An increase in our interest rate target is needed, given current economic conditions and the medium-term outlook,” Lacker said in a statement posted on the bank’s website Saturday.
Lacker, who favored a quarter percentage point rise, was the sole dissenter from the Federal Open Market Committee’s decision to keep interest rates near zero. Fed chairwoman Janet Yellen told a post-FOMC press conference that policy makers needed more time to assess the impact of a slowdown in China and other emerging economies on U.S. growth and inflation.
“Further delay would be a departure from a pattern of behavior that has served us well in the past,” Lacker said. “The historical record strongly suggests that such departures are risky and raise the likelihood of adverse outcomes.”
The U.S. central bank has held its benchmark federal funds rate near zero since December 2008 and has not raised rates in more than nine years.
It was the Richmond Fed president’s first dissent this year, although he has voted against the majority in favor of tighter monetary policy regularly in the past. He first voted in 2006, when he dissented four times, had one dissent in 2009 and eight during 2012.
“U.S. economic conditions have improved quite significantly over the last six years, all things considered. It’s time to recognize the substantial progress that has been achieved and align rates accordingly,” Lacker said.
The central banker gave a speech on Sept. 4 entitled “The Case Against Further Delay,” in which he argued that there was little slack in the labor market and that inflation has been picking up over the past six months. “Recent financial market volatility is unlikely to affect economic fundamentals,” Lacker said in that speech.
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