NEW YORK – The Federal Reserve has done its job to spur economic growth, and it is now up to employers to get the economy moving, Federal Reserve Bank of Dallas President Richard Fisher said Monday.
“The Federal Reserve has done a great deal to reverse the situation that we confronted in 2008 and 2009,” Fisher said, according to prepared text of his remarks, released by the Fed. “As I have said repeatedly, we have filled the gas tanks of the economy with affordable liquidity. What is needed now is for employers to confidently step on the pedal and engage the transmission that will use that gas to move the great job-creating machine of America forward.”
The president and Congress must set incentives for private business to “expand investment, hire workers and go about the business of lifting the income and net worth of the American people,” Fisher told the National Association for Business Economics in Dallas.
While people typically seek short-term fixes when frightened, Fisher said, “my colleagues and I are professionally beholden to beware of short-term fixes that might contradict, or place in jeopardy, the long-term duty and credibility of the central bank. I am wary of adopting any policy that might have the unintended consequence of becoming a veterinary fix rather than a more salutary repairing of the ability to propagate jobs.”
An opponent of QE2, Fisher said, he also was against stating that the Fed would keep the funds rate levels exceptionally low through at least mid-2013 because the benefit would be “outweighed by the risk that such an action would be viewed as a commitment.”
While the panel saw this move as an assurance to markets, Fisher said, he believed making the commitment “would, instead, give job-creating companies, particularly small- and medium-sized businesses, an incentive to further delay borrowing for expansion, given that they feel stymied both by anemic demand and discomfort with how they are taxed and regulated. It seemed to me that signaling that money would likely remain cheap for two years or more would hardly induce those with access to credit to borrow to expand and add to payrolls now.”
Fisher also said the European debt crisis is causing uncertainty in U.S. markets, and these issues need to be resolved in order for the U.S. economy to recover.
If it were up to Fisher, there would be no more accommodation. “If I believe further accommodation or some jujitsu with the yield curve will do the trick and ignite sustainable aggregate demand, I will support it,” he said. “But the bar for such action remains very high for me until the fiscal authorities do their job, just as we have done ours. And if they do, further monetary accommodation may not even be necessary.”
