Says Fed Lending Could Distort Expectations

Increased Federal Reserve lending could destabilize the financial system said Richmond Federal Reserve Bank President Jeffrey Lacker. The dramatic remarks were made during a panel discussion on the economic outlook. Lacker said central bank lending can distort expectations and create a moral hazard. An adverse effect on the financial system could severely limit Forex opportunity.

Fed to Watch Closely For Inflation

Lacker also said that the Fed should watch closely for signs of inflation and commented that it reasonable to expect economic growth in 2009. The Fed president said that the recovery will be helped by the Fed’

s monetary policies, and lower energy costs. Hopefully both factors will increase forex investment opportunity.

Consumers Should Spend More

Lacker commented that bank lending is hindered by a lack of credit and credit worthy borrowers rather than a lack of bank capital. He predicted that weak economic growth and a strong dollar will curb exports in the coming year. During a question and answer session Lacker said that consumers should spend more to stimulate the economy. He noted that a bottom in house prices would signal the beginning of a recovery. Lacker said that the risks of deflation are relatively minor. Deflation could have adverse affects on Forex opportunities.

Hopefully the Fed will be able to follow through with monetary policies that continue to provide Forex opportunity for forex brokers and investors.