RICHMOND, Va. (Reuters) - The Federal Reserve will have a "strong" case to hike U.S. interest rates in June, a hawkish Fed official said on Tuesday, dismissing recently weak economic data as transitory and perhaps due to unseasonable weather.
Richmond Fed President Jeffrey Lacker, who has long called for a prompt tightening of monetary policy, said consumer spending, the labor market and other economic conditions have improved significantly over the last year.
A voting member this year on Fed policy who made many familiar arguments, Lacker predicted more improvement in the labor market and wages in the months ahead, and 2.0 to 2.5 percent GDP growth for the year. He said moves in the dollar and in oil prices were likely transitory, so U.S. inflation should rise to a 2-percent target.
"Given what we know today, a strong case can be made that the federal funds rate should be higher than it is now," Lacker said in prepared remarks to the Greater Richmond Chamber of Commerce. "I expect that, unless incoming economic reports diverge substantially from projections, the case for raising rates will remain strong at the June meeting."
Economists expect the Fed to hike rates from near zero by June at the earliest, though September is seen as more likely due to weak inflation and an economic slowdown in the winter.
Some Fed officials have attempted to de-emphasize the timing of the first rate rise and stress, as Lacker did on Tuesday, that policy will remain accommodative for years.
"Raising the funds rate target a notch or two is less like taking away the punch bowl and more like just slowing down the refills," he said. "We will still be spiking the punch, just not quite as rapidly as we have been."
Lacker also emphasized there is no "fixed, preset timetable" for getting rates up to a normal level of about 3.5-4.0 percent.
Reporting by Jason Lange in Richmond; Writing by Jonathan Spicer; Editing by Chizu Nomiyama