As I wrote in today’s paper it is the outlook for inflation, not growth, that is going to be most difficult for the Fed to judge as it ponders policy post-QE2. In that regard it’s fascinating to watch the dormant debate on core versus headline flare up again.
Jeffrey Lacker – Richmond
Mr Lacker cited both current and forecast headline inflation in his speech with no mention of core.
This generally positive assessment is complemented by the benign outlook for inflation. Over the 12 months ending in December, the price index for personal consumption expenditure has risen 1.2 percent. This low inflation rate seems more consistent with our price stability mandate than the figures over 2 percent that were common in the years leading up to this recession. Many forecasters are expecting inflation this year to come in between 1-½ and 2 percent. That is my expectation as well, and would represent a good outcome.
A new debate is set to rage within the Fed in the wake of its decision to re-open currency swap lines with foreign central banks.
Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, today said at an event in North Carolina that the move was “not a problem” but “we’re going to think about whether we sterilise” the swaps. Read more
Jeffrey Lacker, president of the Richmond Fed, today gave an upbeat view of where the economy is heading in 2010. So upbeat, in fact, that explicitly answered the question: How can economists be so optimistic?
His view for 2010:
Putting the whole picture together, I think the most likely outcome is that the economy will grow at a reasonable pace this year – housing should continue to recover from a very depressed state, consumers should gradually expand spending, business investment should make something of a comeback, and these components of demand should overcome a continuing drag from commercial construction.
His explanation for his optimism: Read more