Fed's Lacker says frequent changes to QE unrealistic

CHARLOTTE, North Carolina Mon Dec 9, 2013 3:01pm EST

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, speaks during the Charlotte Chamber's Economic Outlook Conference in Charlotte, North Carolina December 17, 2012. REUTERS/Chris Keane

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, speaks during the Charlotte Chamber's Economic Outlook Conference in Charlotte, North Carolina December 17, 2012.

Credit: Reuters/Chris Keane

CHARLOTTE, North Carolina (Reuters) - A top Federal Reserve official and critic of Fed stimulus said on Monday it was unrealistic for the U.S. central bank to think it could make frequent adjustments to the pace of its monthly asset purchases.

Richmond Federal Reserve President Jeffrey Lacker also said any change in the Fed's bond-buying program would lead markets to wonder about the path for short-term interest rates.

"If we change the setting of one policy instrument like asset purchases....it's going to be hard to convince people it doesn't have implications for the path of short term interest rates," Lacker told reporters. "So we need to take very good care that we're clear and market expectations are aligned with us on the path of short-term rates."

The Fed has said it is not likely to lift rates from near zero until the jobless rate falls to at least 6.5 percent, and provided inflation doesn't threaten to exceed 2.5 percent.

Markets expect the Fed to start reducing its $85 billion in monthly bond purchases sometime between December and March.

Lacker, who has been critical of the open-ended nature of the program, said it was unrealistic to think the Fed could have adjusted those purchases on a month-to-month basis.

(Reporting By Steven C. Johnson; Editing by Chizu Nomiyama)

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