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More asset purchases by the Federal Reserve could create distortions in financial markets and ignite inflation, said Esther George, the head of the Kansas City Federal Reserve Bank, according to a report Wednesday in the Oklahoman newspaper. "Anytime you have the government involved, you have to think something is not happening right. Right now, at zero interest rate, the markets really aren't pricing risk. They're not really functioning the way they normally would," George said in a speech at the KC Fed's Oklahoma City branch. The Fed last week voted to begin a third round of buying assets - $ 40 billion a month of mortgage-backed securities - in an effort to boost the economy and drive down the unemployment rate. The Fed said it would hold rates near zero until mid-2015 even after the economy started to recovery. While only one voting member of the Federal Open Market Committee dissented from the new policy, several presidents of the Fed regional banks have since disclosed that they argued against taking the steps. Many, like George, said they are worried the Fed plan could rekindle inflation.

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