The president of the Federal Reserve Bank of Richmond said in a speech in Baltimore Wednesday that the central bank's most important charge is to manage inflation, arguing that its abilities to affect real economic activity in other ways are limited or overstep its authority.
Jeffrey Lacker's remarks come as the Federal Reserve considers further increases to a key interest rate, which it raised in December for the first time in nearly a decade.
Federal Reserve Chair Janet Yellen, who has said she sees helping stabilize the economy as an important role for the board, has said additional hikes will be considered in the context of economic conditions.
Remarks by some members, who meet next in March, have suggested they would consider a pause, amid stock market volatility and a strengthening dollar.
But Lacker said further modest rate increases are warranted, even though inflation has remained consistently lower than expectations. He said he expects inflation to approach the Fed's 2 percent target as the decline in oil prices bottoms out.
Focusing on preserving low and stable inflation is the primary way for the Fed to foster growth, he added.
"The role of the Fed is not to prevent every recession or to soothe every instance of financial instability, nor is it within its power to do so," said Lacker in a speech to students at the Johns Hopkins Carey Business School.
Lacker was among the earliest to call for interest rate increases last year and has opposed more activist measures such as quantitative easing in which the Fed purchases government securities in an effort to push interest rates lower. He is currently a non-voting member of the committee that sets rates but participates in policy discussions.
Bernard T. "Bernie" Ferrari, dean of the Johns Hopkins Carey Business School, said Lacker is "slightly but not overly" more positive in his analysis of economic conditions than he is and he thinks the differences between Federal Reserve members should allow strong policies to emerge.
"From a problem-solving point of view, it's great," Ferrari said.