Wednesday, August 20, 2008

Fed's Lacker on the economy, inflation and Fannie and Freddie

Jeffrey Lacker, a continued dissenter on the FOMC, weighs in on inflation, inflation expectations, the outlook for growth, health of the banking sector and Fannie and Freddie.

He certainly does not think the Federal funds rate should be any lower right now, and in his opinion interest rates are "awfully low" in real terms. He is pretty sure core inflation will go higher before it goes lower.

He thinks the second challenge facing the banking industry is broader than the housing slowdown. Certain portfolios are weakening (commercial real estate loans, consumer loans..) which looks more like a "garden variety weakening credit cycle".

Lacker dissents from Paulson and prefers the GSE's to see "demonstrably privatised". With that he joins a chorus of other prominant market commentators like Greenspan and Arthur Levitt.

click for video

source: Fed's Lacker Clashes With Paulson on Fannie-Freddie

Bloomberg video

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