Jeffrey Lacker: “I Don’t Know Whether We’re Going To Raise Rates In October”

Richmond Federal Reserve President Jeffrey Lacker spoke with FOX Business Network’s (FBN) Peter Barnes about when the Federal Reserve will raise interest rates saying, “I don’t know whether we’re going to raise rates in October or not.”  Lacker went on to say, “I’ll make a final decision on the way in, but my views haven’t changed much since September.”

Jeffrey Lacker: "I Don't Know Whether We're Going To Raise Rates In October"

Jeffrey Lacker on whether the Federal Reserve will raise rates in its next meeting:

“Well, to cut to the chase, I don’t know whether we’re going to raise rates in October or not.  I made a decision at the last meeting to dissent, because I thought conditions warranted higher rates then.  I thought the same was true back in June. I was persuaded to hold off, that the timing of the interest rate increase wouldn’t matter plus or minus one or two meetings.  Beyond six to nine months, getting up to six, nine months, that’s another matter entirely. As for the data, so the retail sales report was maybe a notch lower than expectations.  But I don’t think it changes the outlook fundamentally; it doesn’t change the picture for me much.  Consumer spending has been very strong.  We had some very strong retail sales numbers in the spring and the summer.  People are looking at over 3 percent real consumer spending growth for the third quarter, and that’s been consistent with consumer spending having been very strong over the last two years, over 3 percent growth, in contrast to less than 2 percent early in the expansion.  So that, for me is an important data point, and it doesn’t change my outlook that much.”

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Jeffrey Lacker on whether he is okay with raising rates in October:

“So, again, I’ll make a final decision on the way in, but my views haven’t changed much since September.”

Jeffrey Lacker on the jobs report:

“The jobs report is an interesting question.  So a couple of numbers that start with one instead of two, below 200,000 jobs per month.  I point out, though, that even 100,000 jobs per month is more than enough to keep up with the growth of the working age population.  We’ll be growing more rapidly than that, as we’ve been driving the unemployment rate down.  My assessment of the data is that it’s unlikely there’s any meaningful slack left in the labor market, and I think it’s quite plausible that the slowdown in employment growth reflects an increasing difficulty some firms are having in finding qualified workers.  In essence, that’s getting harder and harder, and that’s what’s slowing down growth, not a big stallout in demand of any sort. So that’s how I read the data, and I’ll be putting this together with my staff and listening to my colleagues at the next meeting before I make a decision.”

Jeffrey Lacker on whether based on data he won’t pull the trigger on raising rates in October:

“Well, I think the higher sustained growth we’ve seen in real consumer spending strongly suggests that real interest rates need to be higher than they are now.  It seems unlikely that real interest rates where they are, at below negative 1 percent, inflation adjusted interest rates, is going to be sustainable with this stretch of consumer spending growth at this pace.   I think slack is minimal at this point.  I’m confident inflation is going to move back to 2 percent in the near-term, after these transitory shocks from declining oil prices and the rise in the dollar playout.   That’s what we saw earlier this year.  We had the big decline in oil prices and dollar shock in January.  After that was over, we got 2.5 percent inflation over the next six months, the way we like to measure it best.  So I’m confident that that kind of rebound in inflation is plausible.”