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Fed's Lacker: Jobless Rate Won't Hit 6.5% for Three Years

Javier E. David | Special to CNBC.com
Monday, 17 Dec 2012 | 10:46 AM ET
Fed's Lacker: Would Rather Have Qualitative Threshold, Not Numerical
CNBC's Steve Liesman speaks to Jeffrey Lacker, Richmond Federal Reserve Bank president, who explains why he dissented on a few of the Federal Reserve's moves last week. "A numerical threshold for unemployment is risky for a couple of reasons," he explains.

Richmond Federal Reserve President Jeffrey Lacker, the only Fed member to oppose the new numerical targets for unemployment and inflation, told CNBC Monday that it will take three more years before the US jobless rate falls to the targeted 6.5 percent.

Jeffrey Lacker
Source: Richmondfed.org
Jeffrey Lacker

"I see unemployment coming down to the low 7 [percent range] sometime after next year, in 2014 or so," Lacker said in an interview on "Squawk on the Street". "It could take a while to get back to 6.5 percent."

Last week, the Fed surprised markets by announcing that it would continue its low interest rate policy until unemployment fell to 6.5 percent or inflation rose to 2.5 percent.

Before that, the central bank had tied interest rates to the calendar, saying rates would remain low until 2015.

Lacker said he opposed the numerical targets because the central bank ran the risk of boxing itself in or forcing investors to place too much emphasis on the number.

"The danger is that people can become fixated on it," Lacker said. "It's inappropriate for the central bank to set a target for the unemployment rate or for a labor market outcome because that's determined by things that are largely outside the control of the central bank."

Although Lacker is closely followed as a voting member of the policy-making Federal Open Market Committee, his views are often at odds with the other members, including Fed Chairman Ben Bernanke.

Earlier this year, Lacker rejected the notion that the economy would need a third round of quantitative easing, or QE3.

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