Outgoing Fed Governor Randal K. Quarles said in his closing address Thursday that he was “concerned” about the precedent set by the central bank’s massive pandemic monetary stimulus while other Fed officials elsewhere warned of higher inflation pronounced.
As the Fed’s supreme regulator, which has served as vice chairman for supervision since October 2017, Quarles has made the role of the central bank clear and previously warned of impending risks to the financial system.
The outgoing Fed governor, who submitted his resignation last month, said he had major “concerns” about the novel credit facilities being created by the Federal Reserve to respond to the 2020 pandemic.
While “assisting” the Fed in using its emergency powers to prop up markets and the economy as the “correct response,” Quarles contends that the unprecedented moves will have a significant “impact” on the financial system going forward.
Because the Fed lends directly to a wide variety of businesses, small to large, it is involved in the lending process – which is “both a fiscal and a policy measure, largely taken by an unelected body,” he argues.
There needs to be “a clear understanding” that should the central bank set up similar lending facilities in the future, Congress should transfer oversight and funding to a non-Fed vehicle, Quarles said.
The outgoing Fed governor has also warned of higher inflationary pressures in recent months, a trend that is now being repeated by other governors, including Atlanta Fed President Raphael Bostic, on Thursday.