EDITOR'S NOTE: The Columbia Regional Business Report's interview with Jeff Lacker, CEO of the Federal Reserve Bank of Richmond, took place Sept 12. Fed presidents and governors refrain from public comments on monetary policy issues during the week before Federal Open Market Committee meetings, which begin Tuesday. The “blackout” period began the day after the interview.)
When the Federal Open Market Committee meets Tuesday, talk is bound to turn to whether the Federal Reserve should raise interest rates.
Among those attending the meeting will be Jeff Lacker, CEO of the Federal Reserve Bank of Richmond, whose district includes South Carolina.
What the committee will decide is anyone’s guess. In December the Fed raised the interest rate it charges to banks to a target rate of 0.25% to 0.50%. It was the first time the Fed had raised rates in a decade as it sought to keep the cost of borrowing money low while the nation dug its way out of the Great Recession.
“At this time, it looks like the coast is clear,” Lacker said, adding that benchmarks indicate economic conditions are right for raising the rate.
In June, when the committee last met, any plan to increase the rate was put off because of sluggishness in the economies of key U.S. trading partners and a lackluster jobs report in May.
However, those factors seem to have faded. “To me, it looks like a case for raising rates right now is quite strong,” said Lacker, who recently visited Columbia as part of an ongoing effort to learn what’s happening with the economy on the local and state level.
Lacker will report to the committee on what the economic picture looks like in the Richmond Fed’s territory and then listen to what representatives of the other districts have to say.
“We go in and each present our analysis of the situation,” said Lacker, “but we also expect each other to listen. I don’t make my mind up until I hear everything.”
The FOMC consists of 12 members – the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis.
Lacker, who has been Richmond Fed chief since Aug. 1, 2004, is not slated to vote on a rate hike.
Joining Lacker on his tour of Columbia was Robert Hill Jr., CEO of South State Bank. Hill serves on Richmond Fed’s board of directors, elected to that position by bankers.
Hill said he favors a rate increase. He noted that the inflation rate is about 1.6% and the Fed rate is 25 to 50 basis points. “There’s a real disconnect,” Hill said.
“My view is that we just need to get back to normal,” Hill said. “We’re in a pretty normal economy; a little slower growth, but overall pretty healthy. We just need to get back to normal.”