Fed's Fisher says he's worried about Fed's big balance sheet

GAINESVILLE, Texas Tue Dec 18, 2012 2:43pm EST

GAINESVILLE, Texas (Reuters) - The Federal Reserve's latest round of bond-buying, expected to swell the U.S. central bank's balance sheet to more than $3 trillion, could ultimately compromise the Fed's independence, Dallas Fed President Richard Fisher said on Tuesday.

"It's compounding the difficulty of exit" from the Fed's current super-easy monetary policy, he told reporters after a speech here. "It might even impair our balance sheet."

Under current low Treasury yields, the Fed books gains on its bond holdings, and remits profits to the Treasury. If yields rise, the Fed may no longer be able to remit profits to the Treasury, he said.

"I worry that if we were to get into that situation -- please stress the word 'if' -- we might have more efforts to politically interfere with our independence," he said. "I'm not willing to tolerate that risk."

The Fed last week said it would buy $45 billion in longer-term Treasuries each month, on top of its monthly purchases of $40 billion in mortgage-backed securities, until it sees a substantial improvement in the outlook for the U.S. labor market.

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)


After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.