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Monday, July 11, 2005

Fed's Lacker Says Rate Increases Likely to Continue

Fed Speak signals more rate increases ahead:

Fed's Lacker Says It's 'Early' to Stop Raising Rates (Update1), Bloomberg:  It's too early to expect a pause in Federal Reserve interest rate increases, Fed Bank of Richmond President Jeffrey Lacker said today. … “I think it's still too early to be foreseeing a pause” in Fed rate increases ... “I'm comfortable with the measured pace characterization right now.”  While “inflation expectations seem well contained,” economic growth appears “fairly solid,” … He said he is watching inflation data to see whether rising oil prices spur price increases for other goods and services.  … “Oil prices always pose a bit of a concern to the extent that sharp increases pass through to core inflation,” he said. The inflationary effect of higher oil prices in recent years has been “fairly limited,” he said.  “The more likely risk, although it is a small one at this point, is an acceleration of unit labor costs,” … “In recent months, we've had some core PCE numbers that have been higher than I would like to see sustained, but I like where we are on a year-over-year basis,” Lacker said. “The general anticipation is for the monthly numbers to settle back down in the second half of the year.”  With the economy continuing to expand at a “fairly solid pace,” the Fed can keep up its campaign to prevent inflation from rising, he said.  “In that kind of situation, following through is probably the order of the day,” he said. “It's going to be data driven. It's going to depend on how things unfold.”

David Altig reports probabilities that agree with this assessment.  However, the qualification at the end is worth noting.  Full steam ahead until the data say otherwise.

    Posted by on Monday, July 11, 2005 at 10:17 PM in Economics, Monetary Policy | Permalink  TrackBack (1)  Comments (0)

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