In his speech, "Perspectives on Monetary and Credit Policy," at the Shadow Open Market Symposium in New York, Mr. Lacker took exception with various aspects of the Fed's current policy approach, including the proposal for basing monetary stimulus on the unemployment rate.  "Crisp numerical thresholds may work well in the classroom models used to illustrate policy principles, but one or two economic statistics do not always capture the rich array of policy-relevant information about the state of the economy."

Mr. Lacker also delved into the important issue of Credit policy:  "When the Fed expands reserves by buying private assets, it extends public sector credit to private borrowers. To the extent that purchases of private claims have any effect, they do so by distorting the relative cost of credit among different borrowers. Such differential effects are unlikely to be beneficial, on net, unless borrowers in the favored sector would otherwise face artificially high rates. I think it's difficult to make this case for agency MBS, a sector that historically has benefited from heavy subsidies, which arguably contributed to dangerously high homeowner leverage.

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