Sun Life CIO: US Fed "Powerless" To Stimulate Economy
October 25 2011 - 10:05AM
Dow Jones News
A top Sun Life Financial Inc. (SLF) executive says the U.S.
Federal Reserve's main tool to stimulate economic growth is no
longer effective.
The U.S. central bank's ability to spur mortgage refinancing
through low interest rates isn't possible because housing prices
are too low, said Stephen Peacher, Sun Life's chief investment
officer.
The Fed "is powerless to stimulate the economy," he said at the
Toronto Forum for Global Cities conference in Toronto.
The Fed "can't do much about today's economy," he said.
The average mortgage rate fell from 11% in 1983 to 5%, he
said.
"It doesn't work today because home prices are too low," he
said.
Former Fed chief Paul Volcker is "singularly responsible" for
the 2008 financial crisis because "he broke the back of inflation"
in the 1980s, leading to steadily declining interest rates, and
rising asset prices that in turn led to excessive leverage in the
financial system, Peacher said.
"No good deed goes unpunished," Peacher said.
-By Caroline Van Hasselt; Dow Jones Newswires; 416-306-2023;
caroline.vanhasselt@dowjones.com
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