The U.S. economy is likely to grow at around a 2 percent annual rate for
the foreseeable future, and additional monetary stimulus by the Central Bank is
likely to have little effect on that growth, the president of the Federal
Reserve Bank of Richmond said Friday.
"I think we are likely to see brief swings above and below that figure [2
percent GDP growth] from time to time," Jeffrey Lacker said in a speech to the
Risk Management Association's Richmond chapter. "But I don't see a compelling
case for a sustained departure from a 2 percent average growth rate anytime
soon."
The GDP growth rate, he said, "appears as if it is limited in large part by
structural factors that monetary policy is not capable of offsetting," he said.
"In this situation, to me the benefit-cost trade-off associated with further
monetary stimulus does not look promising," Lacker said, adding that he believes
further increases in the size of the Fed's balance sheet is too risky.
The Federal Open Market Committee said this week it will keep buying $85 billion
in bonds each month and may increase or reduce the pace depending on the outlook
for inflation and the labor market. The Fed has expanded its balance sheet to
$3.32 trillion with bond purchases aimed at spurring economic growth and
bolstering employment.
Lacker said in the speech that 2 percent economic growth "looks like a fairly
good outcome," given the challenges the economy faces. "It represents
significant forward momentum," he said.
"It really demonstrates the resilience of the American economy" despite the
shock of the recession, he said.
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