Richmond Fed Chief: The Central Bank Is Making Too Much Money

Jeffrey Lacker

[credit provider=”Richmond Fed”]

The Fed announced yesterday that its 2011 securities trading and investments had turned a tidy $78.9 billion profit, which was turned over to the Treasury.But in an interview on CNBC this morning, Richmond Fed President Jeffrey Lacker said the central bank is overstepping its bounds and steering dangerously close to fiscal intervention. The value of the Fed’s total assets have jumped to $2.9 trillion from $869 billion before the crisis.

“The central bank really needs to stick to monetary policy, and it is running risks if gets involved in fiscal policy–risks of political entanglements that could weaken our monetary policy independence,” Lacker said.

Any dent Fed policy makes in growth would be temporary, he argued, saying categorically, “Our job is to keep inflation low and stable.”

Lacker also warned of nagging headwinds that could hamper recovery in 2012: labour market mismatch, policy scaring off investors and the flat housing market.

Incidentally, Lacker rotates into a voting role on the FOMC this year.