FRANKFURT — The Federal Reserve is at the limits of what it can do to stimulate the US economy, Dallas Federal Reserve President Richard Fisher said Thursday, arguing that only a long-term fix of the U.S. fiscal situation could restore confidence.

Speaking at Goethe University here, Fisher criticized his Fed colleagues for suggesting they have a lot more room to expand policy. "It serves no purpose" for Fed officials "to say we are nowhere near the limits of monetary easing," he said.

"There is no 'to infinity and beyond' in monetary policy," said Fisher, currently a non-voting member of the Fed. "At some point you have to draw the line."

Fisher acknowledged that in spite of the Fed's easing, "inflation is not an issue in the US right now," but he warned, with repeated references to Germany's period of hyper-inflation, that price instability can happen "in the blink of an eye."

But right now the problem in the United States is "too many people underemployed and too many people unemployed," Fisher said. He argued that the Fed had "necessary but insufficient" tools to reduce unemployment, which he said was a reason for the Fed to go back to the single mandate of price stability.

Fisher said the Fed has used monetary policy "to the maximum effect we feel is possible" in order to avoid recession and provide liquidity to the economy. It is up to Congress to restore confidence in the fiscal future of the U.S., as well as restoring global competitiveness in order to build confidence.

"All we can do is provide liquidity. That does not compel people to use it," Fisher said. "What compels people to use it is fiscal direction and confidence in the future."

Another temporary fix to avoid the looming fiscal cliff would not help restore confidence or boost employment levels in the United States, Fisher said.

Congress needs a solution that "assures the markets that a long-term cure has been found. Businesses cannot plan based on short-term solutions."

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