By David Harrison
CHESTERTOWN, Md. -- Federal Reserve Bank of Richmond President Jeffrey Lacker said a possible fiscal stimulus under the incoming administration of President-elect Donald Trump could cause the Fed to raise interest rates faster than anticipated.
"If a more stimulative fiscal stance would materialize that would bolster the case for raising rates," he told reporters ahead of a panel discussion at Washington College. "As a general matter, doing monetary policy with a more stimulative fiscal outlook usually warrants higher policy rates."
The Fed last raised rates in December to a range between 0.25% and 0.5%. Fed officials expect to raise rates by a quarter-percentage point once this year, most likely at their Dec. 13-14 meeting. They have also penciled in two possible rate increases next year.
Officials will release updated economic and interest-rate forecasts following their December meeting.
Mr. Lacker also said he hoped the new administration would maintain the traditional independence of the Fed.
"I'm hoping that our leaders in Congress and the administration understand that our independence is a value and is important to the credibility of the country's commitment to price stability and I hope they're willing to proceed accordingly," he said.
Mr. Trump has suggested he might be willing to tinker with the current system holding the U.S. central bank at arm's length from the rest of the government. Mr. Lacker has previously spoken out urging Congress to hold off on interfering in the Fed's policy-making.
Mr. Lacker also warned about tying the Fed's interest rate policy to mathematical rules such as the Taylor rule.
"I believe that we could do more to be transparent about the rules we consult on an ongoing basis," he said. "I don't think it's advisable to tie our policy to one specific formula, however."
The House this year passed a bill that would require the Fed to establish a rule to guide monetary policy and to advise lawmakers when they intend to deviate from the rule. With Republicans in charge of both houses of Congress next year, the bill could come up again. Fed officials have criticized the measure.
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(END) Dow Jones Newswires
November 14, 2016 18:41 ET (23:41 GMT)
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