The old hawk speaks to Bloomberg
Recently-retired Richmond Fed President Jeffrey Lacker spoke in a TV interview today and highlighted the same hawkish impulses he touted in his long career.
He said the Fed is taking a risk by shifting its mandate to be looser.
"Inflation expectations are really the credibility and that that can change. The process of how that changes over time is not one that's deeply understood in the economics profession."
He was asked about Powell's belief that secular trends in globalization and automation will undercut inflation and said "I'm not sure I buy it."
He also addressed his long-held hawkish beliefs and how they later proved to be wrong, pointing to bank capital rules as a factor that prevented easy money from getting into the economy.
"What people lost sight of with the Fed's huge balance... it wasn't really doing much for the economy," he said.
Looking ahead, he said the Fed is in a tough spot.
"The danger that they face from this inflation surge -- we have inflation on a six-month basis higher than it's been since 1983 -- the danger is that that persists."
He said they have the tools to fight back but it would be a painful process that's like "a doctor telling you that you have gangrene in your leg and don't worry we have the tools to deal with it, but the tools are the amputation kit and they include a big saw."
The prudent step he believes now is for the Fed to nudge up the expected path of rates.
