Problem is not inflation but fiscal stalemate: Fed's Fisher

Wed May 8, 2013 1:08pm EDT

Federal Reserve Bank of Dallas President Richard Fisher arrives to speak about the concept of breaking up 'too big to fail' banks to a breakout group at the Conservative Political Action Conference (CPAC) in National Harbor, Maryland, March 16, 2013. REUTERS/Jonathan Ernst

Federal Reserve Bank of Dallas President Richard Fisher arrives to speak about the concept of breaking up 'too big to fail' banks to a breakout group at the Conservative Political Action Conference (CPAC) in National Harbor, Maryland, March 16, 2013.

Credit: Reuters/Jonathan Ernst

(Reuters) - The Federal Reserve's extremely accommodative monetary policy has not boosted jobs as much as it should because the U.S. Congress and White House cannot agree on tax and spending policies, a top Fed official said on Wednesday.

"Inflation is not an issue ... I don't think you can say inflation is doing any damage to the economy," said Dallas Federal Reserve Bank President Richard Fisher when asked in an interview on CNBC what is holding back the economy. "The fault lies with the fiscal authorities, and until they get their act together, I don't think you are going to find the kind of growth we would like to see."

The central bank is now buying $85 billion in Treasuries and mortgage-backed securities each month to bolster an anemic recovery and push down the unemployment rate, now at 7.5 percent.

Far from igniting inflation - the biggest fear of central bank policy hawks like Fisher - the bond-buying program may be falling short of its goals.

Inflation by the Fed's preferred measure is running at about half the central bank's 2 percent target, leading some to speculate that, if anything, the Fed may be closer to expanding than paring back its asset-purchase program. <ID:L2N0DO2G6>

But Fisher played down that idea, saying that current low inflation is not "destructive."

Fisher, who does not have a vote on monetary policy this year, reiterated his view that the Fed has done enough and should begin paring its purchases of mortgage-backed securities.

"This has been an effort to juice the economy, and it has done its work," he said. "The question is, what are its limits?"

Since the beginning of the Great Recession the Fed has bought $2.5 trillion in bonds.

Even as Fisher blamed Congress and the Obama administration for failures on fiscal policy, he also expressed confidence that lawmakers would act to fix shortcomings in the Dodd-Frank Wall Street reform legislation, which was aimed at preventing future government bailouts of large companies deemed "too big to fail."

"This is a train in motion to correct and simplify how we deal with 'too big to fail,'" he said. "I do think there will be action on that front," likely after June, he said.

(Reporting by Ann Saphir; Editing by Chizu Nomiyama and Kenneth Barry)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

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.