Fed's Lacker says no shame in returning to zero after June hike

By Reuters

Apr 10, 2015 07:21 PM EDT

Federal Reserve official Jeffrey Lacker on Friday repeated his call for the central bank to consider hiking interest rates in June, and said there was no shame in adjusting them lower again if economic data demanded it.

"If we were to raise rates, and then subsequently reduce them to zero, it might be unexpected, but presumably we're setting rates where we ought to be," Richmond Fed President Jeffrey Lacker said in a question and answer session to reporters after a speech here. "I don't see it as problematic to reduce rates having raised them once."

Lacker's speech was a repeat of the policy views he shared late last month. But he offered more details into his stance in the questions he fielded afterward, and also addressed the minutes of the March policy-setting meeting, which were released on Wednesday.

The minutes said that "several participants" indicated they expected upcoming economic data would warrant an initial rate increase in June. Participants refer to Fed board officials and regional presidents at the table, while the central bank's policy voters are referred to as members.

When asked on Friday how many was "several," Lacker said there was "a pretty substantial amount" of support for June at that point but did not give an exact number. Lacker is one of the voting members on the policy-setting committee.

Lacker's call for a June hike comes amid a weak patch in economic data, including a dismal March jobs report, which was less than half February's pace and the smallest gain since December 2013. It also comes as the soaring dollar and falling oil prices have held back inflation measures. But Lacker cited a plunge in the unemployment rate and strong consumer spending as signs the Fed needed to move ahead with its plans to hike.

"I think there is good reason to believe that some of the recent weakness in indicators as transitory," Lacker told reporters, citing swings in the dollar and energy prices, plus bad weather as impacting first-quarter economic data.

"I think we need to take a longer view. We need to look through that in setting interest rate policy," Lacker said.

Lacker, who was speaking at a Global Interdependence Center event, dismissed the notion of labor market slack and said the cyclical effect of what drives a lower labor participation rate is "gone now," said citing the retirement of baby boomers and other factors.

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