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Fed's Lacker: Twist will boost prices not growth

Fed's Lacker: Twist will boost prices not growth (by Greg Robb)

WASHINGTON (MarketWatch) - Richmond Federal Reserve Bank President Jeffrey Lacker said Monday that he does not support the central bank's Operation Twist move to help to recovery. "My sense is that the main effect will be to raise inflation somewhat rather than increase growth," Lacker said in a speech to a business group in Salisbury, Md. Lacker said he was more worried than most economists about inflation, saying he doubts it will fall much below 2% for a sustained period. Lacker also said he did not support the Fed's decision to reinvest proceeds from maturing agency mortgage-backed securities into the agency MBS market. Previously, the Fed had reinvested the proceeds into Treasurys. "It is simply inappropriate, in my view, for a central bank to channel credit toward some economic sectors and away from others," Lacker said. The growing dissent at the Fed is "no cause for alarm," Lacker said. Economic policymakers can disagree just like Supreme Court justices can disagree, he said.