Tags: Fed | Interest | Rate | Hike

Fed’s Lacker: Interest-Rate Hikes Likely by 2013

Friday, 30 March 2012 09:24 AM

The U.S. economy will pick up enough steam to prompt the Federal Reserve to raise interest rates by 2013, says Federal Reserve Bank of Richmond President Jeffrey Lacker.

Officially, the Fed says economic conditions calling for today's near-zero interest rates will likely stick around through 2014, although Lacker disagrees.

"My estimate is that economic conditions are likely to warrant low rates until sometime in the middle of next year," Lacker tells CNBC.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

"If I had to pick a central tendency in the forecast, that's when I'd pick for when rates are likely to rise," he said. "That's not a promise, and neither is the committee's statement. It's a forecast of what we're likely to find appropriate in the future."

The U.S. economy should grow between 2.0 percent and 2.5 percent this year and up to 3 percent in 2013, Lacker says.

Plus, the economy doesn't need further stimulus measures such as quantitative easing, which are bond purchases from banks designed to juice the economy when rate cuts alone don't work.

"We need to be (aware) of the possibility that we need to start raising rates, withdrawing monetary stimulus, which is a tremendous magnitude right now, before unemployment has gotten down to a place where we can call it full employment or call it sustainable, long-run employment," Lacker says.

Other Fed officials have said tighter monetary policy may be needed.

"If growth continues to improve, the unemployment rate continues to fall, then there will be increasing pressure on us to begin easing off of our policy stance," says Philadelphia Fed President Charles Plosser, according to Reuters.

Fed Chairman Ben Bernanke has said rolling out stimulus measures, interpreted by markets to mean the Fed is more concerned with resuscitating the economy even if it means more inflation down the road, remain possible.

"Well, we don't take any options off the table," Bernanke told ABC News recently.

"We don't know what's going to happen in the future, and we have to be prepared to respond to however the economy evolves."

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

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Friday, 30 March 2012 09:24 AM
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