Fed nominee Fischer: policy decisions are best made early

PALO ALTO, California Fri Mar 14, 2014 11:06pm EDT

1 of 3. Stanley Fischer (L), the former chief of the Bank of Israel, prepares to testify before the Senate Banking Committee confirmation hearing on his nomination to be a member and vice chairman of the Federal Reserve Board of Governors on Capitol Hill in Washington March 13, 2014.

Credit: Reuters/Yuri Gripas

Related Topics

PALO ALTO, California (Reuters) - Stanley Fischer, U.S. President Barack Obama's pick for the No. 2 job at the Federal Reserve, said on Friday that decades of crisis-fighting have taught him the importance of making policy decisions quickly, even before all relevant data is in hand.

"We tend to underestimate the lags in receiving information and the lags with which policy decisions affect the economy," he said in remarks prepared for delivery to the Stanford Institute on Economic Policy.

"Those lags led me to try to make decisions as early as possible, even if that meant that there was more uncertainty about the correctness of the decision than would have been appropriate had the lags been absent."

Fischer was in California to receive the institute's $100,000 prize one day after his nomination hearing in Washington, a session that shed little new light on his policy leanings but suggested he is largely supportive of the Fed's current super-easy monetary policy. He is expected to win Senate confirmation, although the timing is unclear.

His comments Friday came in a speech titled "Lessons from Crises, 1985-2014," billed as a set of remarks about the past rather than reflections on current events.

Still, his inclusion of this particular lesson, number eight on his list, may suggest an inclination to act rather than to wait in the face of uncertainty.

That could be a critical insight into the thinking of a man likely soon to become the most influential U.S. central banker after Fed Chair Janet Yellen, just as the Fed faces the unprecedented task of unwinding its extraordinary stimulus measures launched in the depths of the last financial crisis.

Yellen convenes her first policy-setting meeting as Fed chair next week. Policymakers are expected to continue to reduce their bond-buying program with a view to winding it down before the end of the year.

They are also expected to give investors a clearer idea of when they eventually will start to raise rates, after keeping them near zero since December 2008 to encourage investment and spending. By telegraphing their intentions as best as possible to markets, Fed policymakers hope to make the transition to the first U.S. tightening cycle in a decade as smooth as possible.

At 70, Fischer is anything but an impetuous decision-maker. An economics professor for many years, he taught both former Fed Chair Ben Bernanke and European Central Bank chief Mario Draghi.

He spent seven years as the No. 2 official at the International Monetary Fund during the Asian financial crisis, and headed the Bank of Israel from 2005 until the middle of last year. In that role, he was known for making decisions on interest rates that sometimes took markets by surprise.

On Friday he recounted one rate decision he faced in his early days at Israel's central bank.

He decided to keep the rate unchanged until the following month, he recalled telling his advisers, when the situation would be clearer. "It is never clear next time; it is just unclear in a different way," came the response from his second-in-command.

And so, Fischer said Friday, he learned his lesson: "don't overestimate the benefits of waiting for the situation to clarify."

(Reporting by Ann Saphir; Editing by Ken Wills)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
morbas wrote:
The people have been oppresesed far to long…

USA tax structure is the fault and an obstacle to worldly potential. Transaction tax code imposes disproportionate burden at the most fundamental rights of liberty, justice. Any encumbrance on sustenance is contrary to equality in the ’pursuit of happiness’. Debt and deficit is simply insufficient revenue. We can nationalize the tax code eliminating all other taxation, immediately balancing the budget(s), through a margin graduated income tax principle.

To: Office of Senator ____________________
United States Senate Washington,
D.C. 20510
To: Office of Representative_________________________
U.S. House of Representatives
Washington, DC 20515
We the people of this United States do proclaim this federal government ‘of, by and for the people’. That, in order to fairly distribute revenue burden, to satisfy ‘net income’ progressive taxation, to balance all governments budgets, and to not tax poverty;
The people mandate:
Income National Tax code that shall use margin graduated income tax principle: Margin $30k 0% single, $60K 0% joint, income above this a linear increasing rate {Income-[$30k or $60k])*(Income/$800k)*90%; 90% limit} . Exemptions shall be prohibited. The Federal Reserve shall amend the (90%) rate, and control currency printing mandated to maintaining currency availability and value. The Federal Reserve shall set the Margin rate value well (>2x) above highest of all State Poverty Level(s). Revenue shall be proportioned 1/3rd Federal,1/3rd State proportioned per cast ballot and 1/3rd Local proportioned per cast ballot.
This National Tax is a peoples tax, no other citizen taxation shall be permitted. Business shall not be taxed. The Federal Reserve shall control taxation. The people will by simple majority approve or reject all margin and rate changes at every Congressional House Representative election year ballot.

What say you Dr S. Fischer?

Mar 15, 2014 11:05am EDT  --  Report as abuse
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.