If the August employment report is weak, Fed officials should view it as a "one-month blip" that would not alter the strong labor market picture over the last several years, said Jeffrey Lacker, the president of the Richmond Fed, on Friday. In a speech in Richmond, Lacker said the case for raising rates remains strong, despite recent financial market volatility, which will have only a "quite limited" effect on the U.S. outlook. While the Fed's favorite inflation indicator, the personal consumption expenditure index, rose at a 0.3% annual rate in July, inflation is not as low as this headline suggests because it includes several months last year when inflation was negative, he said. Since January, the PCE index has grown at an average annual rate of 2.2%, Lacker said. That is just above the Fed's 2% target. "I am not arguing that the economy is perfect, but nor is it on the ropes, requiring zero interest rates to get it back into the ring," Lacker said. The Richmond Fed president is a voting member this year. He has been calling for a rate hike since March.
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