US Fed official says easing program raises inflation threat


WASHINGTON — The lone dissenter to the U.S. Federal Reserve’s decision to launch a third round of bond buying to boost the economy says he doesn’t think it will provide much help. He also says it runs the risk of making future inflation worse.

Jeffrey Lacker, the president of the Richmond Federal Reserve Bank, opposed the Fed’s action to begin buying US$40 billion a month in mortgage-backed securities and keep making those purchases until the labor market improves. The Fed’s action Thursday triggered a rally on Wall Street and in financial markets around the world.

Lacker said in a statement Saturday that he believes the labor market is being held back by factors beyond the capacity of the Fed to offset. The Fed vote was 11 to 1.

Lacker has cast the lone dissenting vote at all six Fed meetings this year. In his latest dissent, Lacker took issue with the decision to launch a third round of bond purchases, a process known as quantitative easing.

He also objected to the Fed’s decision to extend its timetable for keeping short-term interest rates low until mid-2015, six months longer than previously planned.

And he objected to new language in the Fed’s statement in which the central bank said that it plans to keep rates near record lows “for a considerable time” even after the economy begins to show signs of strengthening.

“I believe that such 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 Fed’s twin goals of low inflation and maximum employment, Lacker said,