The Federal Reserve's new round of monetary stimulus is unlikely to do much for economic growth without a damaging rise in inflation, Richmond Fed Bank President Jeffrey Lacker said on Friday.
Lacker, an inflation hawk and the lone dissenter on this year's Federal Open Market Committee, said he opposed the announcement in September of an open-ended bond-buying program targeting $40 billion in mortgage securities per month.
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He also opposes the Fed's forward guidance on rates, in which policymakers expect to keep rates at very low levels until at least mid-2015.
"Such language could be misinterpreted as suggesting a diminished commitment to keeping inflation at 2 percent. I would oppose adopting such a stance, and I do not believe my colleagues on the FOMC intended that interpretation," he told an event sponsored by the University of Virginia's Frank Batten School of Leadership and Public Policy.
Lacker said he expects economic growth, which registered a paltry 1.3 percent annual rate in the second quarter, will pick up next year but he did not specify a forecast.
U.S. unemployment fell sharply in September to 7.8 percent, and Lacker said continued healing of the job market should boost consumer sentiment and support household spending. Consumer confidence rose to a five-year high in September, according to a survey from Thomson Reuters and the University of Michigan.
Lacker also reiterated his opposition to the Fed's mortgage bond purchases. He has often argued this favors one sector of the economy over another and crosses the line into fiscal policy.
He said he was optimistic Europe's financial strains would abate next year, lifting a cloud that's been hanging over the U.S. economy for many months.
(Editing by Neil Stempleman)