Recent inflation figures are "unacceptably high" and the Federal Reserve should focus on combating that rather than on stimulating the economy, Richmond Federal Reserve President Jeffrey Lacker said Tuesday.

The risks of a sharp economic slowdown have "diminished substantially," which enables the Fed to consider other challenges, such as rising prices, Lacker said. The central bank can help ease inflation by raising a benchmark short-term interest rate.

The Federal Reserve's policy-making board cut the rate from 5.25 percent to 2 percent in less than eight months. Such aggressive easing of monetary policy "made sense" in order to jump-start the economy, Lacker said in a speech at the National Economic Club.

But "withdrawing some of that stimulus as those risks diminish makes eminent sense as well," he said.

The Fed's preferred measure of inflation has increased by 3.1 percent in the past 12 months and at a 3.9 percent annual rate in the last three months, Lacker said. His preferred inflation target is 1.5 percent.

Meanwhile, exports and business investment have boosted the economy, which has slowed in the face of the housing slump and credit market tightening, he said.

While the economy "is growing at only a tepid pace overall," Lacker said that economic data released in the last few months has "not yet shown the sharp, widespread reversals that define a recession."

"I expect growth to be positive, but quite modest for the rest of this year, and to gradually pick up over the course of next year," he said.

Even if the housing market bottomed out later this year, a recovery in that sector would likely be "exceedingly slow," Lacker said.

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