Kevin Warsh, a governor at the Federal Reserve, has just delivered a very interesting speech in Atlanta.

His main point is that the Fed could start selling mortgage assets it bought to sustain the housing market during the crisis independently of its moves to raise interest rates, putting him squarely in the camp of inflation hawks on the Federal open market committee. Ben Bernanke, Fed chairman, has suggested that any asset sales should come only after monetary policy tightening underway, but Mr Warsh seems to disagree. “Any sale of assets need not signal that policy rates are soon moving higher. Our policy tools can indeed be used independently. I would note that the Fed successfully communicated and demonstrated its ability to exit from most of its extraordinary liquidity facilities over late 2009 and early 2010, even as it continued its policy of extraordinary accommodation,” he said.

The Fed governor, a former Morgan Stanley investment banker and George W. Bush administration official, also attempted to quash the rising talk that the Fed might actually start buying assets again in response to continued weakness in the housing sector and the sluggish recovery, saying that such a move “should be subject to strict scrutiny”. Read more