Jeffrey Lacker, the President of FRB Richmond expects the FRS latest monetary stimulus can increase the unwanted inflation and will not do much for economic growth or job creation.
Although Lacker is sure that monetary policy has done reasonably well recently, the outlook for employment or economy growth on the whole is cautiously optimistic. His opinion is that the recovery from the recession cannot be either quick or easy.
The Fed last month announced a new bond-buying plan that will start off with 40 billion dollars in mortgage debt purchases per month. Housing market is still coping with large inventory and as for the labor market – this is where the Fed cannot influece directly. Lacker said a troubled U.S. labor market was being dampened by " wide variety of factors" factors outside the control of FRS.
"Simply observing a high unemployment rate does not imply that the Fed's monetary policy is failing to comply with its congressional mandate, nor does it necessarily mean that monetary policy needs to do more to achieve its goals," Lacker added.
The U.S. jobless rate fell to 7.8% in September, a welcome sign that the economic recovery was beginning to gain traction. Lacker said the recent pattern of employment growth, with 146,000 jobs per month added in the third quarter, suggested a slowdown earlier in the year had been transitory.
The uncertainty and looming fiscal cliff can bring to the delay in hiring and investments. The best way to improve the labor market for the FRS is to control the inflation at stable 2%, Lacker admits, as problems arise when inflation is unpredictable.