Fed's Fisher-excessively easy policy might fuel inflation
SAN MARCOS, Texas |
SAN MARCOS, Texas Feb 15 (Reuters) - A top Federal Reserve official warned on Wednesday against taking easy monetary policy too far, saying the responsibility for healing the jobs market lies with Congress and the administration, not the Fed.
While cheap and abundant money has helped boost hiring, pushing down the unemployment rate in recent months, the only way to "heal the plight of the American worker" is to reverse uncertainty over the tax code and regulation that is keeping businesses from hiring, Dallas Fed President Richard Fisher said in remarks prepared for delivery to the Texas Manufacturers Summit.
"No amount of monetary accommodation will change the pathology" of such uncertainty, Fisher said, reprising a theme he has come back to again and again over the last two years, even as the Fed has done ever more to push down borrowing costs.
"Indeed, excessive monetary accommodation might only add a further dosage of angst, fueling fears of future inflation," he said.
Fisher called the Fed's newly adopted 2-percent target a "maximum" over time, signaling little tolerance for inflation to rise above that level.
Fisher has been a stalwart critic of easing, a self-described inflation hawk, more concerned with the threat that prices could rise uncontrollably than with the prospect of high unemployment.
The Fed last month said it would keep interest rates low until late 2014, almost 18 months longer than it had previously projected, and Fed Chairman Ben Bernanke left the door open to further monetary easing.
The central bank has already kept interest rates low for more than three years, and bought $2.3 trillion in long-term securities to drive down borrowing costs further.
The unemployment rate has fallen in recent months, hitting 8.3 percent in January.
Meanwhile, inflation has eased, dropping to 0.7 percent by the Fed's preferred measure last quarter, well below the Fed's newly set target.
Fed officials in recent weeks have nodded to stronger economic data, even as the divide between hawks and the Fed's "dovish" core appears as strong as ever.
Minutes from the January meeting of the Fed's policy-setting panel, set to be released later Wednesday, may shed further light on the internal debate.
Philadelphia Fed President Charles Plosser on Tuesday criticized the "accelerationist approach to monetary policy" of some of his colleagues, pointing to signs of economic improvement as reason enough for the U.S. central bank to stand pat on rates for now.
The comments, which step up Plosser's longstanding opposition to the Fed's ultra-easy policies, came less than a day after San Francisco Fed President John Williams said it "is vital that we keep the monetary policy throttle wide open" to reduce unemployment and bring inflation back up to more desireable levels.
Meanwhile, Minneapolis Fed President Narayana Kocherlakota, in comments published on the regional Fed bank's website, said he sees current easy Fed policy as fueling an inflation rise to 2.3 percent next year, above the U.S. central bank's target.
Fisher said it was up to fiscal authorities to get long term debt and deficits under control, or risk hurting long-term U.S. prosperity.
"If we are to heal the plight of the American worker, our fiscal authorities cannot count on the Federal Reserve to do the job only those authorities can do," he said.
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