Fisher: 'Twist' Benefits Don't Outweigh Its Costs

The benefits of "Operation Twist" did not outweigh the perceived costs, said Federal Reserve Bank of Dallas president Richard Fisher, so he voted against it at the last Federal Open Market Committee meeting.

Explaining that he is eager for greater job creation, Fisher told the Dallas Assembly: "I believe the foremost duty of any central banker is to ensure price stability. Indeed, I believe that the Fed cannot deliver on its congressionally mandated task of seeking full employment unless it delivers first on its mandated duty of warding off both inflation and deflation."

Inflation is slightly higher than the Fed would like this year, but Fisher predicted it will drop to the 2% range that the Fed is comfortable with.

"While I remain on constant watch for signs of inflationary impulses, I believe the most urgent issue is job creation and the reduction of the scourge of unemployment," Fisher said, according to a prepared text released by the Fed. "I believe, however, that there is significant risk that the policies recently undertaken by the FOMC are likely to prove ineffective and might well be working against job creation."

He said the committee's decision to "reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities," since "spreads between mortgage-backs and Treasuries have been widening … was acceptable for me as a tactical way to provide limited assistance to the mortgage market at little cost."

The common theme in his dissents, Fisher said, relates to "the efficacy of these initiatives."

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