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Former Fed Governor Sees Continued Inflation Risk

Laurence Meyer, co-founder of Macroeconomic Advisers and a former Federal Reserve governor, told CNBC’s “Squawk Box” that the Fed won't change interest rates at today's meeting.

He said the economy is slowing, but the labor market remains strong, creating upward pressure on wages.

“The (Federal Reserve’s) outlook paragraph talked about firming growth last time and it has to talk about on-going slow growth now,” Meyer said Wednesday. “But then you transition to the forward-looking part of that paragraph and talk about expectations of a moderate pace ahead. With respect to inflation, they talked about inflation moderating last time. The data since that meeting have not been as comforting and they have to be a little bit more cautionary about inflation now. So, lower growth, a little bit more cautionary about inflation and that sets up the policy paragraph which absolutely will be unchanged.”

He said a cooling economy is welcome in the fight against inflation, but the slowdown has yet to affect the “very tight” labor market.

He said weaker economic data is consistent with a growth rate of about 2% this year.

The Federal Open Markets Committee will release its statement on interest rates later today. Most analysts expect the Fed to leave interest rates unchanged.

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