Esther George, Kansas City FRB President, as a voting member of the FOMC committee this year expressed her view on Thursday on Fed`s interest-rate setting policy. Her main concerns is the growing risk on continuing low-rate policy, as accomodative policy for a long time could bring harmful changes and Fed must not ignore this risks.
On supporting low interest rates, she said that at the same tine "I also know that keeping interest rates near zero has its own set of consequences. Specifically, a prolonged period of zero interest rates may substantially increase the risks of future financial imbalances and hamper attainment of the FOMC's 2% inflation goal in the future."
With the central bank's purchase of mortgage securities as well as the Fed's near-zero interest rate policy the prices of assets such as bonds, agricultural land, and high-yield and leveraged loans are at historically high levels, George said. She warned that actively selling a large amount of mortgage securities may disrupt the mortgage market and can bring the "shock" highly accommodative policy.
Esther George also says that highly accommodative policy has its limits, and its influence on labor market is low. The labor market is getting better and throuth the 2013 year the unemployment level can decrease half a percent. She expects the ecomony to grow slightly up 2% this year and as key sectors of economy, including housing, manufacturing and automobile industry are healing.