Great Reboot

Fiscal stimulus would lead to faster rate hikes: Fed's Lacker

Federal Reserve Bank of Richmond President Jeffrey Lacker testifies before the House Financial Services Committee hearing on "Examining How the Dodd-Frank Act Could Result in More Taxpayer-Funded Bailouts" on Capitol Hill in Washington June 26, 2013. REUTERS/Yuri Gripas

RICHMOND, Va. (Reuters) - The Federal Reserve could raise interest rates more quickly if Washington used lower taxes or higher spending to boost economic growth, Richmond Fed President Jeffrey Lacker said on Thursday.

Lacker made the comment when asked how the U.S. central bank would react if the incoming Trump administration and Congress loosened fiscal purse strings.

“If a fiscal stimulus initiative were enacted I think we would see a steeper path” of rate increases, Lacker told a social club in Richmond.

He did not comment directly on the election of Republican businessman Donald Trump to the U.S. presidency on Tuesday, but suggested his views on short term interest rate policy were little changed.

Lacker, who does not have a vote on interest rate policy this year, said higher interest rates were needed given the economy’s low jobless rate and fast growth in employment.

“In December we will be debating another increase no doubt,” he said. “The case for raising rates is relatively strong. I continue to believe that’s the case even with the events of this week.”

Reporting by Jason Lange; Editing by Chizu Nomiyama