Fed’s Lacker says QE3 probably won’t do much to fix labor market

Richmond Fed President Jeffrey Lacker Richmond Fed President Jeffrey Lacker

Richmond Federal Reserve President Jeffrey Lacker said the third round of quantitative easing, or QE3, announced by the central bank last week probably won’t do much to repair the U.S. labor market.

“The effects are very hard to gauge, but my sense is that this is going to have a greater effect on inflation and a minimal impact on jobs,” Lacker said in a Sept. 15 interview on National Public Radio.

Lacker was the lone dissenter to the Federal Open Market Committee’s Sept. 13 decision to purchase $40 billion a month in mortgage debt until the labor market improves and to hold interest rates near zero until at least mid-2015. He has dissented from every FOMC decision this year.

In a statement released by the Richmond Fed explaining his dissent, Lacker said purchases of mortgage-debt should be the responsibility of fiscal authorities.

“Such purchases, as compared to purchases of an equivalent amount of U.S. Treasury securities, distort investment allocations and raise interest rates for other borrowers,” Lacker said in his statement. “Channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve.”

Lacker told NPR that he shares his colleagues frustration with the weak economy and the unemployment rate which has remained above 8 percent since February of 2009.

“It’s frustrating because of the elevated level of unemployment and the human suffering and dislocation that involves,” Lacker said. “And I think we all understand what a lot of households are going through. I think we differ on the efficacy of the tools we have available. And I think we just need some patience right now on the central bank side.”

Lacker, 56, has been president of his regional bank since 2004. He was previously the Richmond Fed’s director of research.

Bloomberg News

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