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Lacker said estimates of the economy's so-called natural real
rate of interest, the rate when economists think there will be
normal economic growth rates and stable inflation, is at or just
above zero.
"This perspective would bolster the case for raising the federal
funds rate target," Lacker, who is not a voting member on the
Fed's rate-setting committee this year but participates in its
discussions, said in prepared remarks for a university gathering
in Baltimore.
Lacker's speech followed comments by Kansas City Fed President
Esther George on Tuesday that the Fed should consider raising
rates at its March 15-16 meeting.
George and Lacker are among the Fed policymakers who most urge
an active fight against future high inflation, or "hawks" in
central banking parlance.
In his speech, Lacker argued against the view that inflation is
expected to fall well short of the Fed's 2 percent target in
coming years.
Many economists and investors think low inflation expectations
and heightened financial market volatility will lead the Fed to
leave interest rates unchanged in March and possibly for the
rest of this year, despite the signal policymakers gave in
December that they could hike four times in 2016.
But Lacker said that economic analysis suggests inflation could
average 1.9 percent in the period between 5 years and 10 years
from the present.
(Reporting by Jason Lange; Editing by Chizu Nomiyama)
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