Lacker Says Fed Swap Arrangements Amount to ‘Fiscal Policy’

Federal Reserve Bank of Richmond President Jeffrey Lacker said he dissented against the Federal Open Market Committee’s currency-swap decision because it was a form of fiscal policy.

“I opposed the temporary swap arrangements to support Federal Reserve lending in foreign currencies,” Lacker said in a statement released on the Richmond Fed’s website. “Such lending amounts to fiscal policy, which I believe is the responsibility of the U.S. Treasury.”

The Fed and five other central banks agreed to lower their pricing on temporary U.S. dollar swap arrangements by 50 basis points. The premium banks pay to borrow dollars overnight from central banks will now be the U.S. dollar overnight index swap rate plus 50 basis points. The new pricing will be applied to operations starting on Dec. 5.

Lacker said he also opposed lowering the interest rate on the swap arrangements below the Fed’s so-called discount rate on direct loans to banks. The discount rate for primary borrowers is currently at 0.75 percent.

Dissents against currency arrangements have been common for the Richmond Fed in the past. Former Richmond Fed President J. Alfred Broaddus Jr. dissented against the Fed’s 2003 authorization for foreign currency operations. Broaddus in remarks later that year explained that foreign currency operations can work against credibility by confusing the public about whether the central bank is working toward domestic or external objectives.

Fed policy makers voted 9-1 in favor of the swap decision in a Nov. 28 videoconference. Lacker voted in place of Philadelphia Fed President Charles Plosser, who was unavailable for the meeting. Lacker will be a voting member of the FOMC next year.

To contact the reporter on this story: Craig Torres in Washington at

To contact the editor responsible for this story: Christopher Wellisz at

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