You are here

New Jersey's Christie steps up criticism of Federal Reserve's 'easy money' policy

chrischristie030615.jpg
New Jersey Governor Chris Christie on Tuesday sharpened his criticism of the US Federal Reserve, suggesting the central bank's "easy money" policies could fuel broader destabilisation of the global economy.

[Lake Buena Vista, FLORIDA] New Jersey Governor Chris Christie on Tuesday sharpened his criticism of the US Federal Reserve, suggesting the central bank's "easy money" policies could fuel broader destabilisation of the global economy.

While the Fed's crisis-era slashing of US interest rates to near zero was justified for awhile, Mr Christie said, that policy will cause "real problems as we move forward."

Mr Christie, a Republican and potential contender in the November 2016 presidential election, has released a number of policy proposals as he has struggled to gain momentum in a crowded field.

The blunt-spoken governor has advocated a flatter tax code and a scaling back down of regulation that he says would spur economic growth.

He first laid out his critique of the Fed in a speech in New Hampshire in mid-May in which he linked low interest rates to a rise in income inequality. He said cheap money had lifted stock prices, boosting the wealth of people who were already rich.

In Tuesday's remarks, Mr Christie again argued that the central bank's policies had exacerbated the gap between rich and poor.

Other global central banks have also loosened policy to bolster flagging economies, particularly the European Central Bank and the Bank of Japan.

The Fed has more often been a target of the Republican Party's Libertarian wing, including Senator Rand Paul of Kentucky, who has already declared his campaign for the presidency.

The central bank not only cut rates in the wake of the crisis but also pumped money into the financial system through a program called quantitative easing. That bond-buying programme has ended, but the Fed's balance sheet, including US Treasuries and mortgage-backed securities, remains well above US$4 trillion.

Moderate Republicans such as Christie have not criticised the Fed as harshly as have members of the libertarian wing such as Rand Paul. Some investors are worried that the mounting criticism could threaten the Fed's independence in the future. "The printing of money that we're doing and the extraordinary borrowing we're doing all around the world is going to come home to roost," Mr Christie said on Tuesday, speaking at a Republican forum sponsored by Florida Governor Rick Scott at a Disney convention centre.

The S&P 500 stock index has gained 212 per cent since its trough in March 2009. Many analysts point to cheap money from the Fed as helping boost those gains.

REUTERS