By Pedro Nicolaci da Costa
BALTIMORE Oct 4 The Federal Reserve could
reduce the pace of its bond-buying stimulus despite a government
shutdown that is preventing the release of key economic data,
Richmond Fed President Jeffrey Lacker said on Friday.
He was speaking even as the Labor Department failed to
release its monthly jobs report, the most widely watched global
indicator, because of cost cuts related to the budget impasse
and shuttering of government.
"We won't be flying blind," Lacker said, pointing to other
types of economic reports. "It doesn't help. It'll slow us down
Lacker said he expects the overall impact of the shutdown to
be "transitory," and therefore not create a major drag on
"If you had told me a two-week shutdown was coming I would
have favored tapering in September anyway," he told reporters
after a speech to the Council for Economic Education.
He said the labor market has already met the conditions of
"substantial improvement" that the Fed linked to an eventual
retreat in its bond-buying stimulus, currently set at $85
billion per month. The Fed surprised markets last month when it
decided to hold off on cutting back on that pace of purchases.
The U.S. economy expanded 2.5 percent in the second quarter
but growth is expected to be slower in the second half of 2013.
Lacker said even if the Fed wanted to, it lacks the power to
counter the economic drag from the budget standoff.
"Federal Reserve policies cannot necessarily counteract the
effects of fiscal policy uncertainty, declining productivity
growth or structural changes in the labor market - all of which
appear to be playing a role to some degree," Lacker said.
Lacker is an inflation hawk who has been skeptical of the
central bank's unconventional policies. While he focused his
remarks mostly on financial literacy and education, his overall
message remained the same.
"As we've seen during the recovery from the Great Recession,
there are significant limits to the power of monetary policy to
affect the real economy," he said.
He criticized the central bank for offering forward guidance
when policymakers are not always certain they can follow