By Steven K. Beckner

CHARLOTTE, N.C. (MNI) – Richmond Federal Reserve Bank President
Jeffrey Lacker made abundantly clear Monday that he is not prepared to
support further easing of monetary policy, at least as long as the
economy maintains its meager projected growth pace and inflation stays
at the top of the Fed’s target range.

Lacker, who will be a voting member of the Fed’s policymaking
Federal Open Market Committee in 2012, was asked by MNI under what
conditions he would support further easing.

He did not totally rule out doing so as he met with reporters
following a speech to the Charlotte Chamber of Commerce, saying that
“everything is going to depend on the data going forward” and that he
did not want to prescribe any rules for what the FOMC should do.

However, Lacker added, “if growth stays about where it is now, 2%
or above and inflation runs around 2%, I’m hard-pressed to see any
rationale for further easing.”

Earlier, in prepared remarks, Lacker had warned Monday that the Fed
cannot hope to spur stronger economic growth or reduce unemployment
through additional monetary stimulus without running the risk of causing
accelerated inflation.

“The macroeconomic experience of 2011 provides vivid illustration,”
he said. “Despite large-scale efforts to provide more monetary stimulus,
growth has disappointed and inflation has ratcheted upward,” he
continued. “Growth is governed predominantly by nonmonetary phenomena,
which implies that monetary stimulus can at times move inflation more
than employment.”

Lacker added that “a central bank’s ability to elevate its
economy’s growth rate over a sustained period, while preserving price
stability, is quite limited.”

Lacker told reporters he continues to be supportive of a change in
the FOMC’s communication strategy toward being more explicit about the
Fed’s inflation objective, but did not go beyond that.

He said he was “very comfortable” with the FOMC’s policy statement
last week, which reflected rising concern about spillover effects from
the European debt crisis.

Lacker said “recent economic news in the U.S. has been positive for
a couple of months” and said this is “going to be a good quarter.”

But “at the same time, prospects for growth in Europe have been
deteriorating,” he went on, and “that has to mean that you revise your
outlook for U.S. exports and their contribution to U.S. growth.”

“I was very comfortable with the tone,” he repeated.

Acting as an alternate on Nov. 30, Lacker voted against lowering
the borrowing rate on dollar swap lines with other central banks by 50
basis points.

He explained that not only did he see no justification for cutting
the swap rate below the Fed’s primary discount rate, but he thinks the
Fed should “stay out of the foreign exchange market.”

And he reiterated his long-standing position that the Fed should
buy only Treasury securities, not other assets such as mortgage-backed
securities, calling the latter credit allocation.

** Market News International **

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