Federal Reserve Bank of Richmond President Jeffrey Lacker said central bankers are setting “unhealthy” precedents by expanding their involvement in credit markets.
“I’m a skeptic,” Lacker, 57, said today during a panel discussion at the National Association for Business Economics 2013 policy conference in Washington. “There is room for doubt on this bold new limit-busting that central banks have done.”
The Richmond Fed president said the “scale and scope of credit-market interventions has set precedents” that will change the relationship between financial markets, financial institutions, the government and central banks. “It was unhealthy coming into the crisis, and I think it is unhealthy coming out of the crisis,” he said.
U.S. central bankers launched a third round of quantitative easing in September, announcing $40 billion of monthly agency mortgage-backed securities purchases. The program was expanded in December with $45 billion of monthly purchases of Treasury notes.
Fed Chairman Ben S. Bernanke and Vice Chairman Janet Yellen in speeches this month supported the central bank’s efforts to keep long-term interest rates low and hold short-term rates near zero.
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