Richmond Federal Reserve Bank President Jeffrey Lacker said the U.S. central bank's monetary policy should be "neutral" in its effect on credit markets, Bloomberg reported.
"I am fine with the size of the monetary base about where it is right now," Lacker said today in a press conference in Virginia. "I think we need that monetary stimulus with the severe recession we are in. But if we are going to expand our balance sheet to that extent we should try to do it in a way that is neutral in its effects across different credit markets."
Lacker also said that government injections of capital into banks under the $700 billion Troubled Asset Relief Program may have discouraged private investors from taking stakes.
The Richmond Fed president dissented at the Federal Open Market Committee meeting on Jan. 28, preferring to expand the money supply "by purchasing U.S. Treasury securities rather than through targeted credit programs." The vote highlighted a split between the Board of Governors and some Fed presidents on how to stem the credit crisis and revive economic growth.
Fed policy makers left the benchmark lending rate unchanged in a range of zero to 0.25 percent last week and said a global slowdown could push the U.S. economy toward very low rates of inflation that may undercut growth.