January 12, 2016 / 8:59 PM / 4 years ago

Fed's Lacker: China not affecting fundamentals of U.S. economy

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, participates in a session titled, "Help or Harm: Central Bank Monetary Policies at the Outer Limits" NABE Economic Policy Conference in Washington March 5, 2013. REUTERS/Yuri Gripas

WASHINGTON (Reuters) - Federal Reserve Bank of Richmond President Jeffrey Lacker said on Tuesday that the economies of the United States and China are linked less than recent volatility in U.S. equity markets seem to imply.

“I think our real economies are linked less than you would think from the extent to which our equity markets seem to have moved in parallel with movements in their exchange rate and their equity markets,” Lacker said following remarks to a business group in Columbia, South Carolina.

He added that the U.S. stock market’s heightened volatility last summer following China’s stock market woes and a devaluation in the yuan “in hindsight looks like an overreaction...the same thing is the case now.”

Lacker, who is not a voter on the Fed’s rate-setting committee this year but participates in its deliberations, also repeated his preference for four interest rate hikes this year.

The Richmond Fed president is less particular about the timing on such increases but said that while inflation pressures do not currently appear on the horizon, “I’d caution that that outlook can change fairly rapidly.”

Fed officials on the whole currently forecast four rate increases this year, but have made clear this is conditioned on incoming data and upward momentum in inflation toward the Fed’s two-percent target rate.

The Fed raised rates by a quarter point in December from near zero, the first increase in nearly a decade.

Reporting by Lindsay Dunsmuir; Editing by Diane Craft

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