There are good arguments in support of a June rate hike, Fed's Lacker says

There were “good arguments” for the US central bank to raise interest rates at its next policy meeting in June, a top official said.

In an interview with The Washington Post, the president of the Federal Reserve bank of Richmond, Jeffrey Lacker, said the case for raising rates in June “looked to be pretty strong” and that policymakers were very far from the benchmarks they had to guide them of where rates ought to be at the moment.

Nonetheless, he cautioned “but as I said, I don’t make up my mind until the meeting comes."

When queried by the newspaper’s Ylan Q.Mui about why there was such a ‘disconnect’ between the Fed’s own expectations for rate hikes and then current market-pricing for tightening, Lacker explained that: “I think markets may be extrapolating from our recent behaviour and thinking all we do is delay. We never recover.

“The longer we delay, the more we’re falling behind.”

He went on to point out how following those benchmarks had proven successful in the past, with the opposite holding true when they were ignored.

In his opinion, the latest slowdown in payroll growth most likely reflected how the country was running out of workers.

Lacker also believed the Fed needed to take into account that investors might be inferring from its actions, or inaction, what the pattern of policy might look like going forward.

The central banker admitted Brexit held the potential to be a major source of uncertainty but the US monetary authority “generally” did not let potential elections, either domestic or foreign, affect its decisions.

“I don’t see it as having outsize implications for US monetary policy,” he said.

Lastly, Lacker said he was not sure of the reasons driving recent low rates of productivity growth.