PALO ALTO, California The Federal Reserve should not buy bonds without limit to try to boost the economy, a top Fed policymaker and staunch critic of the Fed's super-easy monetary policy said on Thursday.
Doing so lets U.S. lawmakers avoid tackling the nation's pressing budget and fiscal problems, Dallas Fed Bank President Richard Fisher suggested in prepared remarks to a conference at Stanford University on the State of the West.
"Only the Congress of the United States can now save us from fiscal perdition. The Federal Reserve cannot," Fisher said. "The Federal Reserve has been carrying the ball for the fiscal authorities by holding down interest rates in an attempt to stoke the recovery while the fiscal authorities wrestle themselves off the mat."
The Fed in September launched an open-ended round of asset purchases, kicking it off with $40 billion in monthly purchases of mortgage-backed securities and pledging to continue or expand the program unless the labor market improves substantially.
The program is aimed at pushing down long-term borrowing costs to give an added boost to the recovery.
Fisher has long argued the real culprit holding back the recovery is the nation's uncertain fiscal and regulatory future.
Fisher spent most of Thursday's speech comparing California - unfavorably - to his home state of Texas, blaming the Golden State's high taxes and restrictive regulatory environment for slowing job creation. Across the nation, inflation and inflationary expectations are tame, while outsized unemployment is the biggest challenge, he said.
Fisher saved his sharpest criticism - and most colorful metaphor invoking both a popular children's movie character and a philosophical phrase dating from the 17th century - to warn against monetary policy that tries to do too much.
"We dare not become the central bank counterpart to Congress by adopting a Buzz Lightyear approach of 'To infinity and beyond!' by endlessly purchasing U.S. Treasuries and agency debt so as to encumber future generations of central bankers with Hobson's choices when it comes to undoing what seems contemporarily appropriate," Fisher said.
(Reporting by Ann Saphir; Editing by Neil Stempleman)