Keep eye on inflation, Lacker says

As banking leaders attempt to combat the slumping economy, concerns about rising inflation should not be put on the back burner, Federal Reserve Bank of Richmond President Jeffrey Lacker said today.

"It is crucial that we not allow expectations of future inflation to ratchet higher during this recession, he said in prepared remarks today at Hebrew University of Jerusalem.

“While the downturn in real economic activity is going to pose challenges for monetary policy in the period ahead, it's essential that we not let inflation drift from view,” Mr. Lacker said.

Since September 2007, the Fed has cut interest rates by 4.25 percentage points to 1% in response to a global credit crunch (InvestmentNews, Oct. 29).

The U.S. economy should start to regain positive momentum sometime next year, due to a drop in energy prices and an expected bottoming of the housing market in the middle of the year, Mr. Lacker said.

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