Federal Reserve Bank President Featured at M.B.A. Lecture

Alan Greenspan’s retirement in January as chairman of the Board of Governors of the Federal Reserve prompted Federal Reserve Bank of Richmond President Jeffrey Lacker to reflect on the Greenspan era during the College of Business Administration’s Oct. 20 M.B.A. lecture. He said the success of monetary policy during Greenspan’s term is evident in the behavior of inflation. As the nation’s central bank, the Federal Reserve sets monetary policy and supervises and regulates member financial institutions.   Jeffery Lacker, Federal Reserve Bank of Richmond president, left, and Roger Weikle, dean of Winthrop's College of Business Administration, shared a few words before Lacker's Oct. 20 lecture. Since the late 1980s, inflation has fallen from an average of over 4.5 percent to about 2.5 percent in recent years. Just as importantly, Lacker said, inflation and inflation expectations have become more stable as well. Greenspan used a practical approach to policy that was not excessively tied to any one doctrine or approach, he said. “The Federal Reserve has worked hard over the years to shape the public’s expectations regarding the conduct of monetary policy. Central to those efforts has been the pursuit of what many call credibility — that is, a reputation for pursuing low and stable inflation,” Lacker said during the speech at Frances May Barnes Recital Hall. “To my mind, building monetary policy credibility has been the true hallmark of the Federal Reserve under Chairman Greenspan’s leadership.” So what will interest rate policy look like in an after-Greenspan world? The Federal Reserve will have to constantly monitor the state of the economy, under the shocks that are affecting the economy’s growth, such as energy costs, Lacker said. “To preserve and build on the credibility we already enjoy, we will need to continue to respond to changing economic conditions in a way that confirms our commitment to low inflation,” he added. “Key to this will be helping the public understand that we intend to respond to future conditions in a way that keeps inflation low and stable.” University officials were glad to host Lacker as its M.B.A. lecture speaker: “ Interest rates in the U.S., as influenced by FED policy, are important to every one of us but also to every domestic business and the entire world," said Roger Weikle, dean of the College of Business Administration. "This is exactly the kind of person we want on campus, someone who knows how the system works but also someone who will influence the decisions over the next year. Dr. Lacker did a great job of bringing headlines to life and giving us information to understand what will happen next. “ To read the entire speech, visit http://www.richmondfed.org/news_and_speeches/presidents_speeches/index.cfm/2005/id=75 Return to Main Page -->