Lacker Dissent

Jeffrey Lacker explains his dissent on the recent FOMC decision in this press release. He says:

"I dissented because I do not believe economic conditions are likely to warrant an exceptionally low federal funds rate for so long. I expect that as economic expansion continues, even if only at a moderate pace, the federal funds rate will need to rise in order to prevent the emergence of inflationary pressures. This increase in interest rates is likely to be necessary before late 2014.

"In addition, the Summary of Economic Projections (SEP) now contains detailed information on the forecasts of Federal Reserve governors and Reserve Bank presidents for the evolution of economic conditions and the federal funds rate under appropriate policy. My dissent also reflected the view that statements about the future path of interest rates are inherently forecasts and are therefore better addressed in the SEP than in the Committee's policy statement.

His reasoning, which I agree with, is that the Fed is going to get itself in trouble by making the commitment that it did, and that any useful foreward guidance we might get from the policy statement is already in the SEP, without the bad commitment.