U.S. inflation pressures remain subdued despite solid improvement in the job market, Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said Sunday.
The outlook gives the central bank room to remain patient about when to begin raising interest rates, Mr. Lacker said.
“Next year sometime it looks plausible that we’ll start needing to increase interest rates,” said Mr. Lacker, who will have a vote on the policy-setting Federal Open Market Committee in 2015, in an interview with Fox News Channel. “We’ll try to time that carefully given what the economy needs.”
Mr. Lacker, a skeptic of the central bank’s more unconventional policies, was fairly optimistic on the economy.
“Given the economic challenges we’ve faced, I think this economy has turned in an excellent performance,” he said.
“This is the sixth year of our recovery, we’ve grown at about 2-1/4% at an annual rate, the unemployment rate has come down from 10% to 5.9%, and inflation is low and not a problem,” he said. “I think it’s likely to continue at about that pace and I think we’re poised for growth ahead.”
Mr. Lacker said he was not too worried about signs of softer growth overseas, including places like Europe, China and Japan. “Stagnant growth abroad wouldn’t change the outlook much. We’ve been getting that for the last couple of years and seem to have managed to cope pretty well nonetheless,” he said.
While the Fed decided last week to conclude its bond-buying program, the central bank’s large balance sheet was still providing support to the economy and lending, Mr. Lacker said.
“Even though we stopped buying them, we still hold those securities, so that stimulus is still there as long as we hold onto those,” he said.