* Lacker, Evans hold rare joint public debate
* Evans says recent payroll reports "very positive"
* Lacker warns inflation expectations could start to mount
By Alister Bull
RICHMOND, Va., April 2 One of the Federal
Reserve's most hawkish officials confronted one of the
institution's most dovish policymakers on Tuesday in a rare
joint public debate over the risks posed to inflation by the
U.S. central bank's bold steps to spur growth.
Policy dove Charles Evans, president of the Federal Reserve
Bank of Chicago, and anti-inflation hawk Jeffrey Lacker, chief
of the Richmond Fed, sparred pointedly and respectfully
Evans stressed that the Fed was still "missing tremendously"
on the employment side of its dual mandate, while its other
charge, inflation, was well under its 2 percent goal.
"Our credibility will be judged by how we do on both sides
of the mandate," he told a dinner event hosted by Virginia
The Fed opted at its March meeting to keep buying bonds at a
monthly $85 billion pace, while vowing to hold interest rates
near zero until unemployment hit 6.5 percent, provided inflation
remained under 2.5 percent.
The U.S. jobless rate in February was a lofty 7.7 percent
and data due on Friday is expected to show that it remained at
that level in March, while firms added 200,000 new jobs as the
economy picked up steam.
Evans, a voting member of the policy-setting committee this
year, was the key Fed leader who advocated for introducing
thresholds for unemployment and inflation to guide expectations
about how long it would hold rates near zero.
He said that recent payroll reports had been very positive
and the economy looked like it would achieve "escape velocity"
next year of 3.5 percent growth.
But Evans sounded a note of caution over swiftly scaling
back the Fed's bond buying, and said that he wanted to see
month-after-month of plus-200,000 new jobs created to be assured
the labor market was on a durable upswing.
"At some point we will reduce the flow rate and end this
program. But it could well be later in the year, or whatever.
We're just going to have to look at the data and see how things
play out," he said, while also stressing inflation was under
In contrast, Lacker, a hardline hawk who dissented at every
policy meeting last year, cited hard lessons from history of
what happened when the Fed allowed inflation to get out of hand.
"I'm not confident we can dial up expected inflation ... and
then dial it down," Lacker told the dinner audience.
He also voiced concern the central bank would be willing to
exit from its policy actions in time, and that a delay would sow
the seeds of future inflation. "I see upside risks starting year
and half, two years from now," he told the audience.
They were introduced by former Richmond Fed President Alfred
Broaddus, who described them as the closest things to polar
opposites on the Fed's policy committee as possible to find.
In separate remarks, Dennis Lockhart, president of the
Atlanta Fed, said he expects the U.S. economy to expand a bit
over 2 percent this year, though he does see some chance that
the expansion could prove even stronger.
At the same time, Lockhart flagged short-term budget cuts
from Washington as a risk to near-term economic performance. He
also noted the U.S. labor market, while better, remains only a
shadow of its pre-recession self. "Conditions in the broad labor
market are quite mixed," he told an audience in Birmingham,
Alabama, adding that he was still cautious about recent signs of
A fourth Fed official, Minneapolis Fed President Narayana
Kocherlakota, also spoke on Tuesday and reiterated his view that
Fed policy was still too tight and ought to be eased further.