KC Fed's George warns on zero rates, MBS buys

Kansas City Fed President Esther George, who this year is a voting member of the Federal Reserve's interest-rate setting policy committee, made clear her concerns with the central bank's purchase of mortgage securities as well as the Fed's near-zero interest rate policy. While she supports "low" interest rates, "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." Prices of assets such as bonds, agricultural land, and high-yield and leveraged loans are at historically high levels, George said at the Central Exchange in Kansas City. She warned that actively selling a large amount of mortgage securities may disrupt the mortgage market and said there's a risk of "announcement shock" from perceptions policy will remain highly accommodative regardless of circumstance

http://www.marketwatch.com/story/kc-feds-george-warns-on-zero-rates-mbs-buys-2013-01-10?link=MW_latest_news