By Steven K. Beckner

CHARLOTTE, N.C. (MNI) – Richmond Federal Reserve Bank President
Jeffrey Lacker Thursday night said that the expansion of the money
supply that has resulted from the Fed’s efforts to fight the financial
crisis and recession was “warranted.”

Noting that inflation has averaged 2% over the past several years,
he said he “would give us good marks so far.”

Lacker, answering questions following a dinner speech to the UNC
Banking Institute, said it is appropriate for the central bank to expand
the money supply when demand for money increases during a liquidity

He said this can be done through open market operations and that
there is no longer a need for the Fed to play the traditional “lender of
last resort” role and lend directly to financial institutions.

“When demand for money increases, increase the money supply … but
don’t take a position by lending to individual institutions,” he said.

In other comments, Lacker said that so far the impact on the U.S.
economy of the European debt crisis “has been relatively minor” and he
said best estimates suggest it will “remain minor.”

But he said “there’s always a risk of a hiccup, a speed bump in the
process that could lead to some uncertainty and some pullback in
spending that’s broader that could pose a risk.”

“So far it seems manageable,” he added.

** MNI **