Dallas Federal Reserve Bank president Richard Fisher yesterday emphasized the need to maintain the Fed’s independence from political pressure at a time of record federal budget deficits, saying it needs to feel free to raise interest rates when others want “cheap credit.”

Fisher, in remarks prepared for a conference sponsored by the Levy Economics Institute, also stressed the need for the Fed to keep its regulatory function, saying that complements its monetary policy role in important ways.

“Central banks must take a long-term view of the economy and craft appropriate policy responses,” he said. “We must have the leeway to raise interest rates when others want cheap credit and rein in risky financial practices when others want easy profits.”

“A Fed committed to wringing out the economy’s excesses and keeping banks on the straight and narrow is not going to win popularity contests,” he continued. “Some of those displeased by Fed decisions will seek to satisfy their desires by resorting to political pressure.”

Fisher said “independent does not mean unaccountable.” He said the Fed has “always been subject to oversight” and said Fed Chairman Ben Bernanke has expanded the Fed’s transparency.

— Market News International

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