Fed's Fisher worried about "Hotel California" monetary policy

CHICAGO Fri Dec 14, 2012 7:43am EST

Richard W. Fisher, President and Chief Executive Officer for the Federal Reserve Bank of Dallas, speaks on International Economics at the Council on Foreign Relations in New York, March 3, 2010. REUTERS/Shannon Stapleton

Richard W. Fisher, President and Chief Executive Officer for the Federal Reserve Bank of Dallas, speaks on International Economics at the Council on Foreign Relations in New York, March 3, 2010.

Credit: Reuters/Shannon Stapleton

CHICAGO (Reuters) - The Federal Reserve's latest moves to reduce borrowing costs and boost the economy could be hard to reverse, a top Fed official said on Friday.

"I argued that basically we were at risk of what I call a 'Hotel California' monetary policy," Dallas Fed President Richard Fisher said in an interview on CNBC. Like the Eagles song of that name, he said, "You can check out any time you want, but you can never leave."

Fed decided on Wednesday to maintain its monthly asset purchases of $45 billion of Treasury bonds and $40 billion of mortgage-backed securities, until it saw a substantial improvement in the outlook for the U.S. labor market.

The moves will swell the Fed's balance sheet, making it hard to make an eventual exit, Fisher said.

Fisher also said he had argued against the adoption of numerical thresholds by the U.S. central bank to guide future policy.

The Fed also said on Wednesday it would keep interest rates near zero until unemployment falls to 6.5 percent, provided that inflation did not rise above 2.5 percent. This replaced a previous commitment to hold rates down until at least mid-2015.

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)

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