Jeffrey Lacker on Monetary Stimulus

Next week, U.S. central bankers will convene amongst predictions that 2012’s growth will not be sufficient to reduce the nation’s current unemployment rate of 8.5%. Explored options include additional monetary stimulus, as well as having the central bank loosen up on certain markets.

Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, sees no reason to institute either of these measures unless the economy encounters severe inflation or a dramatic growth slump. “I am still where I was a month or two ago when I said I didn’t see a compelling case for further stimulus,” he said. “The record of the last year and a half is that stimulus raised inflation and didn’t do much for growth on a sustained basis. And I think if we did it again, that is what would happen.”

He continued, stating that this year should bring “more modest expectations for monetary policy.”

“My takeaway from 2011 is the lesson that the impediments to more rapid U.S. growth are likely to be deeper and more persistent than we thought a year ago,” Lacker added. “I am expecting only a modest improvement for 2012.”