WASHINGTON — Businesses of all shapes and sizes, including manufacturers, have been "given a great gift" from the U.S. central bank, Dallas Federal Reserve Bank President Richard Fisher said Thursday, referring to the "abundant, super-cheap monetary fuel needed to stoke up their production engines and expand their businesses."

"Every manufacturer of goods in America has been given a great gift by your central bank - the lowest cost of money in 237 years, an extension of the roaring bond market rally that has now run 32 years, and a broad stock market rally that began in March of 2009 and has gone on to bust through all previous record highs," Fisher said in a speech prepared for the U.S. Manufacturing Summit in Orlando, Fla.

Fisher also pointed out there are risks to the policy the Fed has been pursuing, and has previously said he will argue in favor of dialing back the Fed's $85 billion monthly bond-buying program at the September Federal Open Market Committee meeting. Fisher is not a voting member of the Fed's policymaking committee this year.

But he said Thursday the easy money policy has helped businesses clean up their balance sheets. "American companies publicly held and private - large, medium and small - have taken advantage of the cheap and abundant money made available by the Fed's very-accommodative monetary policy to create lean and muscular balance sheets," Fisher said.

"In response to the deep recession and the challenges of fiscal and regulatory uncertainty, they have rationalized their cost structures and ramped up productivity, leveraging IT, just-in-time inventory management and new production structures to the max," he said. "Their workers are more productive than ever."

Fisher went on to say that while "American manufacturers today have the potential, far and away, to be the most efficient operators in the world," they are being held back by "fiscal and regulatory policy of the gang that can't shoot straight in Washington."

"The remaining obstacle to being the absolute best economy for manufacturers and other businesses, bar none, has been fiscal and regulatory policy that seems incapable of providing job-creating manufacturers and other businesses with tax, spending and regulatory incentives to take advantage of the cheap and abundant fuel the Fed has provided."

He said manufacturing gains in the past two years have been choppy, with output still about 5% below its December 2007 business-cycle peak. "Notice how manufacturing growth slowed not only when Europe's woes began to crimp confidence, but also when fiscal infighting dominated behavior in Washington," he said.

The downturn in U.S. manufacturing output during the 2007-09 recession was on the order of 20%, he said. "If our manufacturing sector is to experience a lasting renaissance, significant changes in fiscal policy and regulation that emanate from Washington are sorely needed," he said.

Comparing manufacturers to legendary race horses such as Secretariat, Man o' War and Seabiscuit, Fisher said Congress and the President were in control of the starting gate. "If they would just let 'em rip, we would have an economy that would take off," he said.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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