November 7, 2010 / 3:38 PM / 9 years ago

Senior House Republican opposes Fed easing plan

WASHINGTON (Reuters) - The Federal Reserve’s plan to boost economic growth with $600 billion in bond purchases is a mistake that will trigger inflation, a leading Republican in the House of Representatives said on Sunday.

Texas Congressman Ron Paul speaks at the 2010 Southern Republican Leadership Conference in New Orleans, Louisiana April 10, 2010. REUTERS/Sean Gardner

Representative Paul Ryan, expected to become chairman of the House budget committee when Republicans take control of the chamber in January, told the “Fox News Sunday” program that the “upsides are very low” in the central bank’s moves to inject more money into the U.S. economy.

“I think its going to give us a big inflation problem down the road,” Ryan said.

The Fed launched a fresh round of so-called quantitative easing last week, saying it will purchase $600 billion in U.S. government securities. The U.S. stock market, which had been rising on expectations of the move, welcomed the move with further gains.

Ryan said the Fed should stick to its main job of ensuring price stability, adding that the Fed’s plan was “destabilizing” investment outlooks.

Fed Chairman Ben Bernanke on Saturday defended the central bank’s action, saying the bond purchases would help the economy and not jump-start inflation.

The U.S. central bank is an independent part of government and does not take orders from Congress or the president.

During the financial crisis the Fed pushed the key Federal Funds rate near zero and bought some $1.7 trillion in government and mortgage bonds to stabilize the economy and return it to growth.

But U.S. growth has been subpar the last six months, prompting the Fed to act further to stimulate growth.

But some economists are concerned about inflation and some U.S. trading partners have criticized it because the move has helped weaken the value of the dollar, making U.S. goods cheaper.

Reporting by Donna Smith; Editing by Philip Barbara

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