U.S. economic growth is strong enough for the Federal Reserve to consider bumping up interest rates for the first time since 2006, an official who will help make that decision said Wednesday.
Jeffrey M. Lacker, president of the central bank’s Fifth District, which includes South Carolina, has been in Charleston this week to talk with business leaders and visit area employers.
Lacker is considered a hawk on inflation, meaning he’d rather rein it in sooner than later. And as a member of the powerful Federal Open Market Committee, he’ll cast a vote one way or the other when the Fed looks at raising rates again.
The numbers suggest that the time to act is near, he said.
“Looking back to sometime in the middle of last year, economic growth picked up steam in a more serious way than it ever had in this expansion,” Lacker said in an interview Wednesday at Belmond Charleston Place.
Of particular note was a surge in consumer spending and greater confidence in the labor market, he said.
Also, Lacker said he is “confident” that inflation is set to move higher, even though it “seems really well-contained now” and is, in fact, below the Fed’s target rate.
At the same time, many of the formulas, indicators and policy rules the central bank looks at “are pointing to higher real interest rates, that real interest rates should be higher than they are right now,” he said.
Lacker doesn’t expect the committee to take up the issue when it meets this month, namely because it already has suggested it wouldn’t.
“That means June is the first meeting at which we could raise rates without undermining that past communication,” he said. “So it depends on the data between now and then. It seems likely — highly likely to me — a strong case will be made for raising rates. But I haven’t decided yet how I’m going to vote, and I’ll wait to hear what my colleagues have to say.”
Lacker’s visit included a speech at the Riviera Theatre before about 150 business and community leaders Wednesday night. The title of his talk was “Investing in People for Long-Term Prosperity.”
“The basic message is human capital investment is key,” he said
Lacker has led the Fifth District, which is based in Richmond, Va., since August 2004.
His last official visit to Charleston was in March 2009, when the nation was in the depths of the financial crisis.
This week’s trip included a tour of the Boeing South Carolina 787 Dreamliner campus in North Charleston on Wednesday.
“It’s really impressive,” Lacker said.
Contact John McDermott at 937-5572.