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Fed's Lacker says economy strong enough for higher rates

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Reuters
Reuters
Reuters is an international news organisation owned by Thomson Reuters

Fed policymakers on Thursday voted to keep the Fed’s target interest rate at between zero and a quarter point.

“Such exceptionally low real interest rates are unlikely to be appropriate for an economy with persistently strong consumption growth and tightening labor markets,” Lacker said in a statement.

He was the lone dissenter among the 10 Fed officials who voted at the meeting. Lacker said the Fed’s target should rise by a quarter point.

Lacker has a history of dissent in Fed policy meetings. In 2012, he voted against eight straight policy decisions by the central bank. At the time he was urging the Fed to wind down asset purchases that were aimed at stimulating the economy.

Regarding Thursday’s decision at the Fed, Lacker said a rebound in consumer spending and “tightening labor markets” meant the economy no longer needed zero interest rates.

He said keeping interest rates at their current level deviated from the way the Fed has responded to the economy in the past, which was dangerous because public understanding of the Fed’s behavior was “an essential foundation for the monetary stability we currently enjoy.”

“Such departures are risky and raise the likelihood of adverse outcomes,” Lacker said.

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