The U.S. central bank is advised to be proactive about keeping down inflation rates despite economic weakness according to a senior Federal Reserve official on Tuesday.
Borrowing costs have been promised to remain close to zero percent by various members of the Treasure and reserve and over $ 1 trillion has been dedicated to stimulating the economy but the question remains as to when such measures need to be aborted to avoid further inflation.
"If we hope to keep inflation in check, we cannot be paralyzed by patches of lingering weakness, which could persist well into the recovery," said Jeffery Lacker, president of the Richmond Federal Reserve Bank.
Lacker is well-documented in his stance against inflation and has spoken about his beliefs regarding decreased consumer confidence as a consequence of such measures "This risk could be particularly pertinent to the current recovery, given the massive and unprecedented expansion in bank reserves that has occurred," he said.
Policy makers believe an absence of confidence in maintained inflation rates to have harmful effects on both consumer and producer behavior.
Lacker has stated that he anticipated that the economy to grow, if only slowly, next year with the recovery of the housing market and a slow building confidence encouraging business and consumer spending. Risks that inflation will fall have been substantially diminished since January.
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