Fed's Lacker says there are signs inflation is heating up
Inflation appears to be heating up in the United States, part of a strong case for the Federal Reserve to raise interest rates more quickly, Richmond Fed President Jeffrey Lacker said on Wednesday.
Consumer price increases have been below the Fed's 2 percent target for more than four years but some policymakers have argued the jobless rate at 4.9 percent is low enough to pressure wages higher, which could in turn lead to faster price gains.
Lacker, who does not have a vote on Fed interest rate policy this year but has argued interest rates need to rise significantly to ward off future inflation, said price gains might now be accelerating.
Fed's Fischer says low neutral rate a sign of potential economic trouble
Evidence that the so-called natural rate of interest has fallen to low levels could mean the economy is stuck in a low-growth rut that could prove hard to escape, Federal Reserve Vice Chair Stanley Fischer said on Wednesday.
Speaking to a central banking seminar in New York, the Fed's second-in-command said he was concerned that the changes in world savings and investment patterns that may have driven down the natural rate could "prove to be quite persistent...We could be stuck in a new longer-run equilibrium characterized by sluggish growth."
As a result, he said, central bankers may face a future where the short-term interest rates set by policymakers never get far above zero, and the unconventional tools used during the financial crisis become a "recurrent" fact of life.
"Ultralow interest rates may reflect more than just cyclical forces," Fischer said, but "be yet another indication that the economy's growth potential may have dimmed considerably."
Fischer's remarks did not address current Fed policy or interest rate plans.
Dollar solidly bid as markets brace for Friday's jobs report
The dollar stood tall against the yen on Thursday in early Asian trading and was steady against other rivals ahead of this week's nonfarm payrolls report that could reinforce expectations that the U.S. Federal Reserve will hike interest rates by December.
Underpinning the dollar, Chicago Fed President Charles Evans said he would be "fine" with raising U.S. interest rates by year-end if U.S. economic data remained firm.
The dollar index, which tracks the U.S. unit against a basket of six major currencies, was slightly higher at 96.153 .DXY, but shy of last week's high of 96.442, which was its highest since Aug. 9.
Oil up two percent to June highs after another U.S. crude draw
Oil prices settled up about 2 percent on Wednesday, hitting their highest since June, after the fifth unexpected weekly drawdown in U.S. crude inventories added to support on hopes that major producers will agree to cut output next month.
The U.S. Energy Information Administration (EIA) said crude stockpiles fell 3 million barrels last week, opposite of forecasts of analysts polled by Reuters for a build of 2.6 million barrels.
Since the beginning of September, U.S. crude stocks have plunged 26 million barrels, but inventories remain at their highest in this century, EIA data showed. [EIA/S]
Reference: Reuters, CNBC
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