Former Richmond Fed Chief, Jeffrey Lacker has predicted that despite the recent banking crisis, the Fed will continue to hike. He stated that the hike will be needed to maintain market’s stability and to prevent inflation. Despite the various issues associated with the financial system, the Fed is expected to prioritize its goals of bringing the economy back on track. The prediction comes amidst current concerns about global trade tensions, geopolitical risks, and the fragility of emerging markets. Lacker’s outlook provides insight into the shifting dynamics of the US economy and potential changes for the future.
Former Richmond Federal Reserve President Jeffrey Lacker believes that despite a series of bank failures this month, the Fed should – and will – remain firm in hiking interest rates at its upcoming March meeting, and subsequent meetings thereafter. According to Lacker, more rate hikes will be necessary to combat inflation. In an interview with Squawk Box, Lacker said that the Fed should display conviction to its anti-inflation cause by making a 25 basis point increase during the Federal Open Markets Committee meeting on Wednesday.
Market expectations show that such a hike will be in line with anticipated moves, although there remains an 18.8% chance of no hike taking place. Lacker believes that pausing now would send a signal of concern and worry, indicating that the Fed knows things are worse than people think. Some argue that the Fed’s recent actions, such as the Bank Term Funding Program, reverse the progress made in reducing the money supply over the past year. However, Lacker believes that the banking crisis is not as severe as some make it out to be.
Bitcoin enthusiasts, such as Strike CEO Jack Mallers and former Coinbase CTO Balaji Srinivasan, predict that hyperinflation is imminent. Mallers claims that the US dollar is entering an era of perpetual 5 to 10% inflation, while Srinivasan has placed a bet that Bitcoin will reach $1 million due to hyperinflation in the next 90 days.
Critics of the Fed’s actions suggest that its solutions to the bank failures may only exacerbate inflation, as it did in the late 1990s. However, Lacker believes that the Fed has separate tools to address credit problems that do not involve changes to monetary policy. As the inflation fight continues, it remains to be seen whether the Fed will prioritize stabilizing the banking system or combating inflation.
– Former Richmond Federal Reserve President Believes More Rate Hikes Are Needed
– Fed Should Remain Firm in Hiking Interest Rates Despite Bank Failures, Says Ex-Chair