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19 Sep 2014
Fed's Lacker at odds with the central bank's exit strategy
FXStreet (Łódź) - According to a statement released on Friday, Richmond Fed President Jeffrey Lacker didn't entirely support the FOMC's strategy towards normalizing monetary policy, announced on Wednesday, as he saw their decision to hold back selling mortgage-backed securities as misguided.
Lacker said that in his view MBS should be sold at a steady price, because by doing otherwise the Fed prolongs its interference in the allocation of credit.
"The Fed’s MBS holdings may put downward pressure on mortgage rates, compared to holding an equivalent amount of Treasury securities, but if so, then other borrowers would likely face higher interest rates," he stressed. "While this would favor home mortgage borrowers, it tilts the playing field against other borrowing by consumers."
Lacker said that in his view MBS should be sold at a steady price, because by doing otherwise the Fed prolongs its interference in the allocation of credit.
"The Fed’s MBS holdings may put downward pressure on mortgage rates, compared to holding an equivalent amount of Treasury securities, but if so, then other borrowers would likely face higher interest rates," he stressed. "While this would favor home mortgage borrowers, it tilts the playing field against other borrowing by consumers."