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Fed's Lacker sees strong June rate-hike case as risks dissipate

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Federal Reserve Bank of Richmond President Jeffrey Lacker said a June interest-rate increase by the US central bank is in order with global risks having "entirely dissipated."

[WASHINGTON] Federal Reserve Bank of Richmond President Jeffrey Lacker said a June interest-rate increase by the US central bank is in order with global risks having "entirely dissipated."

"I certainly supported a rate increase at the April meeting," Mr Lacker said Thursday in an interview on Bloomberg Radio. "I think the case would be very strong for raising rates in June."

The policy-making Federal Open Market Committee will next meet June 14-15 in Washington. Minutes of their April session released Wednesday showed most of the committee favored a June increase if the economy continues to improve.

Mr Lacker said the risks to growth in China "look less certainly than a few months ago" and he didn't expect the dollar to strengthen enough to damage the US economy.

"I see risks from global and financial developments having virtually entirely dissipated," he said.

Mr Lacker, who doesn't vote this year on FOMC decisions, said investors misread the committee's intentions after it held rates steady at its past two meetings.

"My sense of things is markets took the wrong signal from us pausing in March and April," he said. "They overestimated how likely we were to pause for the rest of the year."

Odds of a Fed rate hike in June, based on prices in federal funds futures contracts, were as low as 4 per cent earlier this week. Following the minutes release they have bounced back to more than 30 per cent.

Mr Lacker also weighed in on presumptive Republican presidential nominee Donald Trump's comments that if he wins the White House in November he would probably replace Fed Chair Janet Yellen.

"I think it would be problematic for a presidential candidate to dismiss a Fed chair on the basis solely of the perceived party affiliation," he said.

BLOOMBERG