DALLAS — Dallas Federal Reserve Bank president Richard Fisher indicated Monday it would take a lot to convince him that the Fed needs to resume cutting interest rates, but also said he is not prepared yet to argue that it’s time for the Fed to start raising rates.
While expressing concern about inflation and inflation expectations, Fisher said that the rebound in the value of the dollar and the decline in the price of gold are hopeful signs that the markets have confidence in the Fed’s determination to curb inflation.
In an interview with Market News International, Fisher repeated his belief that the economy is in for an extended period of “anemic” growth and said it “will take awhile” for financial markets to return to normal, but added that allowing inflation pressures to mount would only worsen the economy’s performance.
He said the Fed should focus on improving the functioning of the financial “pipes” through which money flows to the economy. He said the aim of the Fed’s liquidity measures, including the steps it took Friday to augment its various credit facilities, is not just to engage in “crisis management,” but to modernize the Fed’s “tool kit” to make monetary policy more effective.
Fisher declined to parse the meaning of the reworded statement, which the Fed’s rate-setting Federal Open Market Committee issued last Wednesday in announcing another 25 basis point cut in the federal funds rate to 2%.
Fisher, who dissented for the third straight meeting against lowering the funds rate, declined to say whether or not the FOMC was signaling a pause.
“My recommendation is that you take it at face value,” he said. “There are risks on both sides. There are tail risks, as the economists like to call them, on both sides.”
— Market News International
