Federal Reserve Bank of Richmond President Jeffrey Lacker said the quickening U.S. recovery means policy makers need to take “quite seriously” their commitment to review a $600 billion monetary-stimulus program.

“The distinct improvement in the economic outlook since the program was initiated suggests taking that re-evaluation quite seriously,” Lacker said today in a speech in Newark, Delaware. “That re-evaluation will be challenging, because inflation is capable of accelerating, even if the level of economic activity has not yet returned to pre-recession trend.”

Higher consumer spending, along with business investment in equipment and software, point to U.S. growth this year of “pretty close to 4 percent,” Lacker said.

Fed policy makers pledged in November to buy $600 billion of Treasurys through June to spur growth in a second round of so-called quantitative easing, building on the $1.7 trillion first round of purchases of mortgage and government debt that ended in March 2010.

Lacker said in December he was “not well disposed” to the stimulus program dubbed QE2 by analysts and investors, saying he thought the risks exceeded the benefits. He is among a minority of Fed policy makers skeptical of the asset purchases. The Fed has said it will regularly review the pace and size of its stimulus.

“I expect noticeably stronger growth in overall activity this year than last,” Lacker, 55, said in prepared remarks at an economic-forecast forum at the University of Delaware. The inflation outlook is “benign,” and he projects price increases this year of 1.5 percent to 2 percent.

Limited Damage

Risks to the economy include a “depressed” housing market along with foreclosures and a high stable of vacant homes, Lacker said. At the same time, the industry represents about 2 1/4 percent of U.S. output, “so the damage this sector is capable of inflicting is in some sense limited,” he said.

Chairman Ben S. Bernanke, by comparison, said on Feb. 3 that he needs to see “a sustained period of stronger job creation” before deeming the recovery firmly established. The Fed’s Jan. 26 statement said the recovery “has been insufficient to bring about a significant improvement in labor market conditions,” expanding its focus beyond the jobless rate.

Lacker doesn’t have a vote this year on the interest-rate- setting Federal Open Market Committee. He dissented four times in 2006 in favor of higher interest rates.

Inject Money

In January 2009 Lacker voted against an FOMC decision to buy housing debt, indicating a preference to inject money into the banking system through purchases of U.S. Treasury securities.

Unemployment declined to 9 percent in January from December’s 9.4 percent, the Labor Department said Feb. 4. Employers added 36,000 workers, short of the 146,000 median gain projected in a Bloomberg News surveyed of economists, as winter storms deterred hiring. The two-month decline in the jobless rate, which was 9.8 percent in November, was the biggest since 1958.

While additions to payrolls were smaller than forecast, “an array of forward-looking indicators of employment trends point to continued labor market improvement,” Lacker said today.

He said it’s “hard to say” how much higher commodity prices will feed into broader inflation. The increases may have a “transitory” effect on overall inflation or may persist longer if companies pass along input prices to customers, Lacker said.

Speaks Today

Atlanta Fed President Dennis Lockhart is scheduled to speak today in Anniston, Alabama, while the Dallas Fed’s Richard Fisher plans to speak in Dallas. Bernanke testifies tomorrow before the House Budget Committee.

The Fed’s most closely watched inflation gauge, the Commerce Department’s core personal consumption expenditures price index excluding food and energy, rose 0.7 percent in December from a year earlier, the smallest advance since records began in 1959.

The U.S. grew at a 3.2 percent annual rate in the fourth quarter as consumer spending climbed by the most in more than four years.