Richmond Fed President Lacker Warns of Rate Hikes

Lacker’s main point on employment is that the labor market’s recovery may have been less than the decline in the national unemployment rate would indicate. This is from long-term unemployment rates remaining at a historic high, the labor force participation rate being at its lowest in decades, and many people who have simply dropped out of the labor force altogether.

Still, Lacker ended up at the point about rate hikes despite the need for companies and communities to invest in people. The lack of ability to find skilled workers is a drag. Lacker even talked about investing in focusing more on the young over trying to retrain adult workers (of course, he was speaking to college students).

The closing remarks were where the goodies came in. Lacker said that he thinks the Fed will have to raise rates in 2015. He also said the timing of those rate hikes will be tricky, and he said that low interest rates are appropriate based on the current economic conditions.

The long and short of the matter is that Lacker remains one of the Fed hawks. Still, calling for a rate hike and making a rate hike are two different animals. As a reminder, Lacker is no longer a voting member of the Federal Open Market Committee (FOMC). He is now an alternate member.

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