Like all of his Fed colleagues in their recent public appearances, Richmond Federal Reserve Bank President Jeffrey Lacker made it clear today that further rate cuts are on the table. "The current downside risks mean that further slowing, and thus further easing, is quite possible," Lacker told a Risk Management Association meeting in Richmond. "But inflation also presents risks," he said. And that's where he departed from the standard Fed script. Like some of the other regional Fed bank presidents, Lacker has begun raising the level of anti-inflation rhetoric. "I am also troubled by the lengthy divergence we've seen between overall and core inflation," Lacker said. In the last few years, overall inflation has not reverted back to the core level on a regular basis because food and energy prices had no clear trend. Now they do. "In the last few years," Lacker said, "overall inflation has been persistently above core inflation and few observers expect oil prices to go back below $20 per barrel." The core job of the Fed and every other central bank is to protect the purchasing power of their currency, so "it is overall inflation that we need to keep down, not just core inflation", Lacker said. Both Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser have also begun emphasizing the need for the Fed to protect its anti-inflation credibility and head off a wage-price spiral of rising inflation expectations. In Lacker's view: "If energy and food prices continue to push overall inflation above core inflation, then this higher overall trend could work its way into expectations, further complicating monetary policy in 2008."