Jan 31 (Reuters) - The Federal Reserve’s decision to ratchet down its massive bond-buying program was a modest and positive step, a top Fed official said on Friday, but continued super-easy policies pose risks both at home and abroad.
“I remain concerned that continuation of these policies could have significant long-term costs,” Kansas City Federal Reserve President Esther George said at a Basel Committee/Financial Stability Institute high-level meeting in Cape Town, South Africa, according to written remarks released by the regional Fed bank.
Already, she said, there are signs that banks are “chasing yields,” building up risky bets that could threaten financial stability longer term, she said. And the negative effects of super-easy policies are not confined to the countries, like the United States, that pursue them, she said.
“Such policies can influence other countries by distorting their exchange rates and balance of payment positions, capital flows and rates of credit expansion,” she said.
George has been a stalwart opponent of the Fed’s bond-buying program. Last year she consistently cast her vote against the Fed’s policy on this until the final meeting in December when the U.S. central bank decided to begin winding it down.