With Fed funds effectively already at zero, the power of the FOMC, of which regional Fed bank presidents are members are quite dimisnished. The power to undertake further action falls to the Board of Governors, led by Ben Bernanke. The Fed chairman is always powerful, but in this situation he is nearly all-powerful. That does not seem to sit well with Lacker and other Regional Fed members, especially the hawks.
Lacker warns that the Fed is mixing monetary policy with credit policy, saying that mix is fraught with risks. He went on to say that he does not believe that deflation is a major risk now and says the Fed may need to withdraw monetary stimulus even before the credit markets are fully heeled. He sees housing bottoming in 2009 and the economy regaining momentum sometime this year.
