"I dissented because I opposed additional asset purchases at this time," Lacker said in a Sept. 15 prepared statement. "Further monetary stimulus now is unlikely to result in a discernible improvement in growth, but if it does, it's also likely to cause an unwanted increase in inflation."
Lacker went on to say that improvement in labor market conditions "appears to have been held back by real impediments that are beyond the capacity of monetary policy to offset. In such circumstances, further monetary stimulus runs the risk of raising inflation in a way that threatens the stability of inflation expectations."
In a speech Sept. 17, Lacker said impediments include the decline in the housing market and the shift in economic activity away from residential construction and related supply industries.
"The collapse in housing construction was a huge blow to our economy, and it will take a substantial amount of time for us to recover by shifting labor, capital and spending toward other growth opportunities," he said.
He also cited political gridlock "that has delayed remedies to our unsustainable federal fiscal path" and created "paralyzing uncertainty." The gridlock "appears to have seriously dampened investments and hiring for the new business ventures that typically would take up the economic slack caused by one sector's decline," he said.
In addition, Lacker said he dissented because he disagrees with the open-ended time period of the Fed's planned purchases and the decision to buy more mortgage-backed securities. Such purchases "distort investment allocations and raise interest rates for other borrowers," he said. "Channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve."
Lacker wrapped up his Sept. 17 speech by saying he has the utmost respect for his colleagues on the FOMC and he hopes they're correct that the additional stimulus won't raise the risk of destabilizing inflation.
Reach George Hohmann at busin...@dailymail.com or 304-348-4836.