Fed will not monetize deficit: Fisher

WASHINGTON Thu Apr 15, 2010 10:10am EDT

WASHINGTON (Reuters) - The U.S. Federal Reserve has made clear it will not monetize federal budget deficits by printing money, a senior U.S. Federal Reserve official said on Thursday.

"We have politely made clear in all our speeches ... that we will not monetize the deficits," Dallas Federal Reserve Bank President Richard Fisher said on a panel at the Johns Hopkins University's School of Advanced International Studies.

The Fed is finished with its job of providing liquidity to markets during the financial crisis and is debating how best to withdraw reserves from the financial system, he said.

"Our balance sheet is way too large. We have assets on our balance sheet which will create problems unless we figure out how to manage them," he said.

Some Fed officials regret the U.S. central bank's decision to purchase $300 billion in longer-term Treasury securities during the crisis because it suggested the Fed was prepared to fund the U.S. fiscal shortfall, Fisher said.

The Dallas Fed chief is not a voter on the Fed's interest-rate setting panel this year.

(Editing by James Dalgleish)

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