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Fed's Lacker leery of central bank mortgage buys
August 29, 2013 / 6:13 PM / 4 years ago

Fed's Lacker leery of central bank mortgage buys

NEWPORT NEWS, Va., Aug 29 (Reuters) - Federal Reserve purchases of mortgage bonds to stimulate the economy risk dragging the central bank into the realm of politics, threatening its independence, Richmond Fed President Jeffrey Lacker said on Thursday.

In a largely historical speech that avoided direct remarks on the current outlook for the U.S. economy or monetary policy, Lacker reiterated what has been his long-standing opposition to what he sees as direct intervention in particular credit markets - and therefore outside the appropriate realm of central bank action.

“Compared to that benchmark policy, buying agency MBS channels funds to mortgage borrowers, financed through sales of Treasury securities to the public,” Lacker told students at Christopher Newport University.

“Aggressive use of a central bank’s asset portfolio to channel credit to particular economic sectors or entities threatens dragging the central bank into distributional politics and places that governance arrangement at risk,” he said.

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