By Alister Bull
RICHMOND, Va., Jan 31 (Reuters) - Richmond Federal Reserve President Jeffrey Lacker said on Saturday he dissented against the Fed's policy decision of last week because he is concerned the U.S. central bank should not get directly involved in credit market support.
However, Lacker said his decision was not 'against expansive monetary policy,' which he said was warranted by the severe recession confronting the U.S. economy.
'I am comfortable with the monetary base about where it is now,' Lacker told reporters on the sidelines of an economics conference hosted by Richmond University.
'My dissent was about the composition of our portfolio, it was about the kind of assets we hold. I am fine with the size of the monetary base about where it is right now,' he said.
'I think we need that monetary stimulus with the severe recession we are in. But if we are going to expand our balance sheet to that extent, I think we should try and do it in a way that is neutral in its effects across different credit markets,' Lacker said.
'And so I would prefer to buy a broad class of risk-free assets like Treasuries rather than to target a particular segment of the credit markets.'
Lacker said he was worries about creating winners and losers in credit markets that could hamper the policy flexibility of the Federal Reserve in the future.
'It is about not distorting credit flows, not channeling resources to one credit market at the expense of another. If you compare buying Treasuries to a target credit program, the targeted credit program will result in lower interest rates in the targeted credit sector but higher interest rates in other sectors,' he said. 'I'm not sure we want to raise some people's interest rates in order to lower other people's interest rates.'
(Reporting by Alister Bull, editing by Gary Crosse)
((+1-202-354-5820, e-mail: alister.bull@reuters.com)) Keywords: FED LACKER/ (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
RICHMOND, Va., Jan 31 (Reuters) - Richmond Federal Reserve President Jeffrey Lacker said on Saturday he dissented against the Fed's policy decision of last week because he is concerned the U.S. central bank should not get directly involved in credit market support.
However, Lacker said his decision was not 'against expansive monetary policy,' which he said was warranted by the severe recession confronting the U.S. economy.
'I am comfortable with the monetary base about where it is now,' Lacker told reporters on the sidelines of an economics conference hosted by Richmond University.
'My dissent was about the composition of our portfolio, it was about the kind of assets we hold. I am fine with the size of the monetary base about where it is right now,' he said.
'I think we need that monetary stimulus with the severe recession we are in. But if we are going to expand our balance sheet to that extent, I think we should try and do it in a way that is neutral in its effects across different credit markets,' Lacker said.
'And so I would prefer to buy a broad class of risk-free assets like Treasuries rather than to target a particular segment of the credit markets.'
Lacker said he was worries about creating winners and losers in credit markets that could hamper the policy flexibility of the Federal Reserve in the future.
'It is about not distorting credit flows, not channeling resources to one credit market at the expense of another. If you compare buying Treasuries to a target credit program, the targeted credit program will result in lower interest rates in the targeted credit sector but higher interest rates in other sectors,' he said. 'I'm not sure we want to raise some people's interest rates in order to lower other people's interest rates.'
(Reporting by Alister Bull, editing by Gary Crosse)
((+1-202-354-5820, e-mail: alister.bull@reuters.com)) Keywords: FED LACKER/ (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.