By Steven K. Beckner

CHARLOTTE, N.C. (MNI) – Richmond Federal Reserve Bank President
Jeffrey Lacker Thursday night said that monetary policy is “appropriate”
now, but indicated he would oppose further monetary stimulus.

And Lacker, a voting member of the Fed’s policymaking Federal Open
Market Committee, reiterated his disagreement with the FOMC majority’s
sense of how long the federal funds rate should be kept near zero.

Lacker dissented at the January and March meetings against the
FOMC’s policy statement extending the expected period of zero rates
until at least late 2014.

And in a session with reporters following a dinner speech, he
explained that he dissented because he thinks the Fed may well have to
raise rates “sometime in 2013.”

That does not mean that he necessarily thinks the funds rate is so
low now that it will generate inflation or excessive speculation,
though. “Where we are now is appropriate,” he replied to an MNI
question.

But Lacker made clear he would be against additional monetary
stimulus, presumably through quantitative easing, expressing doubt that
it would help resolve high unemployment which Fed Chairman Ben Bernanke
has called largely “cyclical” in nature and hence responsive to monetary
measures to stimulate demand.

“I think the evidence is really unclear on” whether 8.3%
unemployment is primarily cyclical or structural.

“I think that the labor market is facing some serious impediments,”
he said, but “I’ve said before they’re real in nature, not monetary.”

“I haven’t been convinced more monetary stimulus would help the
labor market (improve) materially more rapidly,” he added.

As for Bernanke’s thesis that, to sustain recent job gains, the
economy will need to grow faster, Lacker said he believes that faster
job growth and in the face of relatively slow GDP growth likely reflects
weakening productivity growth.

He said more rapid productivity growth during the recession, when
employers were laying off workers in heavy numbers, “may not have been
sustainable.”

Lacker is known as an inflation hawk, but at least for the time
being, he expressed confidence that inflation will remain in the
neighborhood of 2%.

He projected 2% to 2.5% GDP growth this year.

** MNI Washington Bureau: 202-371-2121 **

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