Fed Lacker Views on the Economi and the Central Bank’s Securities Purchase Programs

Speaking today in Charlottesville, Virginia, the U.S. Federal Reserve Bank of Richmond President Jeffrey Lacker said he sees signs of increased consumer spending that, combined with the Fed’s aggressive monetary policy should help the american economy resume positive growth later this fiscal year.

From Reuters: “It now appears as if the pace of contraction is diminishing, and at some point later this year, activity will bottom out and begin expanding again,” Lacker said.

Mr. Lacker touched a bit on the topic of price levels too, saying he sees the threat of deflation as somewhat overstated. He  underscored the fact that core inflation and the public’s inflation expectations are both still around 2%. However, Lacker said “those who fear ramped up inflation once the US recovers have identified a legitimate concern, and said it is up the Fed to manage this.”

Lacker also said he is comfortable with the current size of the Fed’s securities purchase programs.

From DJ: Last week, the Fed voted to maintain the size of its mortgage-related and Treasury securities purchase facilities at a total of $1.75 trillion. Of that total, $1.45 trillion is for agency and agency-backed mortgage backed securities purchases and $300 billion is for Treasurys.

“They’re sized about right…given how I’m expecting the recession to play out over the course of the year,” Lacker said following a speech.

Lacker also said he expects private-sector bank lending to increase as the economy recovers and said losses on legacy assets shouldn’t impede that process.

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