Fed’s Lacker said weak spots in the U.S. economy can not prevent exit of support programs

November 17, 2009 by · Leave a Comment
Filed under: Opinion 

This is very true, the Fed needs to make sure it is forward-looking in their policy decisions so they do not allow inflation to get out of control.  I still believe they will not react quick enough and we are going to see a bout of inflation that will lead into deflation before we have a “real” recovery.

You can not borrow your way out of a credit crisis period.  We have an excessive amount of debt that needs to default to expunge from our financial system so we have a balance of income and serviceable debt.  Until that happens no real confidence is in the markets and we are basing our investment decisions on trends and speculation.

Reuters, Richmond – A senior Federal Reserve official said on Tuesday that the U.S. central bank must remain vigilant about keeping inflation in check and not let patchy economic weakness deter it from beginning to withdraw extraordinary levels of support.

The Fed has slashed borrowing costs to near zero percent and pumped more than $1 trillion into the banking system to stimulate the economy since last year, and the question of when to begin an exit from those measures is a topic of intense discussion.

“If we hope to keep inflation in check, we cannot be paralyzed by patches of lingering weakness, which could persist well into the recovery,” the president of the Richmond Federal Reserve Bank, Jeffrey Lacker, said in a speech to members of the Virginia House of Delegates.

The president of the San Francisco Fed, Janet Yellen, also warned about the length that the central bank can maintain its ultra-cheap money policies because of inflation concerns, but said the recovery will be slow.

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