Lacker Says Fed’s Operation Twist Won’t Spur U.S. Employment

Federal Reserve Bank of Richmond President Jeffrey Lacker said last month’s move to reduce long- term interest rates is unlikely to spur a job market hampered by uncertainty over fiscal policy and government regulation.

“I tend to think it would cause higher inflation and have only a transitory or fleeting effect on growth,” Lacker said yesterday in response to audience questions after a speech in Madison, Wisconsin.

Fed Chairman Ben S. Bernanke said last week the U.S. is facing “a national crisis” with the jobless rate at around 9 percent since April 2009. The European debt crisis, political haggling in the U.S. and a plunge in stock prices have prompted a drop in consumer and business confidence that may hurt spending and hiring. Bernanke is scheduled to testify today to a congressional panel about the economic outlook.

Policy makers voted Sept. 21 to push down mortgage and other loan rates in bid to spur growth and employment. The Fed plans to do so by extending maturities of the Treasuries in its portfolio, buying $400 billion of long-term debt and selling an equal amount of shorter-term securities.

“There are impediments to growth that somewhat lower longer-term interest rates would not be the antidote for,” Lacker said of the policy, known as Operation Twist. “Our role is fairly limited in terms of increasing growth.”