Lacker: US may not need all planned stimulus

Richmond Fed president says economy 'appears to have leveled out,' might not require extra central bank spending.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

Bailout tracker
Follow the money: Bailout tracker
The government is engaged in a far-reaching - and expensive - effort to rescue the economy. Here's how you can keep tabs on the bailouts. More
Map
How stimulus will help your state
The Obama administration says the Recovery Act created or saved 640,000 jobs through September. Here's a state-by-state breakdown.
Grassroots stimulus
Using $2 bills and "buy local" promotions, these 6 towns have launched their own campaigns to keep local businesses alive.
Should the $8,000 first-time homebuyer tax credit be extended beyond Nov. 30?
  • Yes
  • No

DANVILLE, Va. (Reuters) -- The economy appears to have stabilized and may not need all the stimulus the central bank had planned to offer, Richmond Federal Reserve Bank President Jeffrey Lacker said Thursday.

"The economy appears to have leveled out and I believe we can look forward to better times ahead," Lacker told a business group.

Even as he cautioned that "conditions remain distressed in many industries and localities," Lacker, a voting member of the Federal Reserve's policy-setting panel this year, said the central bank would have to calibrate its purchases of long-term securities carefully to avoid providing too much economic stimulus.

Lacker said the Fed's commitment to buy up to $200 billion in debt of government-sponsored mortgage agencies and up to $1.25 trillion in mortgage-backed securities issued by those agencies has supplied reserves to banks that reduce their need to borrow from the Fed. At a certain point, the banking system would no longer need to borrow to obtain the desired level of reserve balances, he said.

"I will be carefully evaluating whether we need or want the additional stimulus that purchasing the full amount ... would provide," he added.

Lacker's remarks suggest pressure is already building within the Fed to pull back some of its unusual measures to boost the economy as signs of recovery mount.

The Richmond Fed president said inflation is currently "right on target," but a further large decline would be unwelcome.

However, measures of inflation expectations, while imperfect, suggest consumer price pressure is more likely to rise than fall, he said.

He said the central bank's decision to hold rates low in 2003-2004 over deflation worries will factor into his thinking about when to raise rates as the economy recovers from a painful recession.

"Looking back... some economists have made the case that we waited too long," he said. "I'm taking that on board ... as we time our exit going forward."

In an interview with the Danville Register & Bee newspaper, Lacker said the housing market had picked up about five months ago and would no longer be a drag on economic growth.

Exports may be picking up and the rate of job loss is slowing, he told the paper. Lacker added that banks no longer appeared to be tightening credit and that credit conditions will ease as the job market rebounds.

"It's a time of opportunity, even for people experiencing hard times because of the labor market," Lacker said. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Best-loved cars in America These cars and trucks topped J.D. Power's APEAL survey, which measures how much owners like their new vehicles. More
America's most powerful cars A new 'horsepower war' has erupted among U.S. automakers and these are the most potent weapons in their arsenals. More
A sampling of beers being made with traditional Latin flavors A small but growing number of craft breweries are including passion fruit, Mexican cinnamon and other traditional Latin flavors. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Copyright 2009 Reuters All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.