Fed’s Lacker Predicts Moderate 2012 Growth

Federal Reserve Bank of Richmond President Jeffrey Lacker predicted the U.S. economy will grow 2 percent to 2.5 percent next year, with inflation likely to meet goals though posing a risk. The recent cooling in prices “is likely to prove as transitory, as did the acceleration we saw earlier in the year,” Lacker said in a speech today in Charlotte, North Carolina. “Despite this year’s run-up, I believe the inflation outlook is reasonably good” though “I still view the risks to inflation as tilted to the upside.” “A comparison of 2011 with the experience of 2004 through 2007, for example, suggests that an upswing in inflation at this stage of the business cycle is typically long-lasting,” Lacker said to the Charlotte Chamber of Commerce economic-outlook conference. Lacker said he based on projection for growth on continued gains in jobs, which will aidconsumer confidence, and growth at a “less torrid pace” for business investment. Housing will probably remain “relatively dormant” and government spending won’t aid the economy, while export demand is likely to slow because of the slowdown in Europe, he said. “Monetary policy is often credited with entirely too much influence on real growth,” he said. “Monetary policy is about inflation -- that is, the value of money.”

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