Richmond Fed chief opposed to QE3

Washington: Richmond Federal Reserve president Jeffrey Lacker said that he opposed the central bank’s third round of quantitative easing in mortgage-backed securities because allocating credit should be the province of fiscal authorities such as the US Treasury or Congress.

“I strongly opposed purchasing additional agency mortgage-backed securities,” Lacker said in a statement released on Saturday by the Richmond Fed. “Such purchases, as compared to purchases of an equivalent amount of US Treasury securities, distort investment allocations and raise interest rates for other borrowers.”

Lacker said that “channelling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve.”

Lacker was the lone dissenter to the Federal Open Market Committee’s (FOMC) decision on Thursday to purchase $40 billion (Dh146.9 billion) a month in mortgage debt until the labour market improves and to hold interest rates near zero until at least mid-2015. Lacker has dissented from every FOMC decision this year.

The Fed said in last week’s statement that “highly accommodative” monetary policy will “remain appropriate for a considerable time after the economic recovery strengthens.”

The Richmond Fed chief said he also opposed this language and that “an implied commitment to provide stimulus beyond the point at which the recovery strengthens and growth increases would be inconsistent with a balanced approach to the FOMC’s price stability and maximum employment mandates.”

Lacker, 56, has been president of his regional bank since 2004. He was previously the Richmond Fed’s director of research.