Bank of Richmond president Jeffrey Lacker has said that he expects US GDP growth to fluctuate around the two per cent mark for the foreseeable future, differing from the view of many forecasters who expect significant acceleration soon (full speech here).
He is particularly concerned about low employment growth – something he mentioned during an interview with Bloomberg TV last week (he also said the Fed is nowhere near cutting the size of its balance sheet and he’s optimistic on the US economy in the long term) – particularly youth unemployment. The contracting labour force participation, he says, is not just down to a weak market, but also demographic factors and higher-education choices.
He defends the use of an expansive monetary policy immediately following the recession, but further stimulus would not be effective.
Finally, he dismissed the notion that declines in the bond and stock markets following the FOMC statement on tapering QE was unexpected, saying the drop is a normal part of the process and “should not be surprising”.
Following Lacker's comments, US Treasuries fell, pushing 10 year yields back to a near two year high, as did European markets, with the FTSE going negative.