* Says data from U.S. economy much better
* A lot of liquidity in economy not being used
* Remarks follow Bernanke's comments on easy policy
* Describes Cyprus as unique case
* Does not criticise rescue plan as dangerous precedent
By Martin Dokoupil and Stanley Carvalho
ABU DHABI, March 26 Richard Fisher, President of
the Dallas Federal Reserve, repeated on Tuesday his call for the
U.S. central bank to slightly reduce its bond purchasing
Fisher, speaking at a financial conference in the United
Arab Emirates capital, said that data from the U.S. economy had
improved a lot recently and that there had been an incredible
revival of the collateralised loan obligation market.
"I have been advocating for tapering of asset purchases. I
think we should be adjusting that... We are not going to go like
that forever," Fisher said.
"I do not want to go from wild turkey to cold turkey
overnight. But I think we might just taper it a little bit and
turn it down as the economy gets stronger. And I think we are at
the point where we can afford to consider it."
The efficacy of the bond purchases has diminished, Fisher
said, adding that he favoured trimming back purchases of
mortgage-backed securities as the housing market recovers. He
declined to say how much the programme should be reduced.
Fisher, long a vocal critic of the Fed's exceptionally loose
monetary policy, does not vote on its policy-setting panel this
year. He has been among the minority in emphasizing the risks of
continuing to add to the Fed's balance sheet.
He said the root of U.S. economic problem was fiscal policy,
not monetary policy, warning that there was a lot of liquidity
in the economy that was not being utilised as businesses lacked
certainty about the direction of fiscal policy.
"We ... know that monetary policy is necessary but not
sufficient to achieve full employment because it's also a
function of fiscal policy. And there lies the problem," he said.
Fisher noted that he wasn't the only policymaker arguing for
lower bond purchases. Charles Plosser, President of the
Philadelphia Fed, has taken a similar position.
Last week, Fed Chairman Ben Bernanke signalled a willingness
to begin scaling back the programme if the U.S. economy
continues to improve, but downplayed the programme's risks and
made clear he did not expect to begin tightening policy soon.
Fisher said on Tuesday that the U.S. economy was beginning
to move forward at a 2-3 percent clip though it was not
"We are moving towards a growth rate of 3 percent as we
progress," he later told reporters.
He described this week's international rescue plan for
Cyprus, which has rattled global markets by including the
radical step of penalising big depositors at its banks, as
unique, since the island was a depository for "hot money"
seeking high returns.
Fisher said the difficulty with the rescue was what it
signalled to other depositors around the world. But he did not
explicitly criticise the plan as setting a dangerous precedent.
"All central bankers are ... certainly hesitant to either
criticise or describe the activities of our colleagues elsewhere
in the world. We are struggling in the United States getting it
right, and we understand the great difficulty of the ECB
(European Central Bank) because it is a new experiment."
He added on Cyprus, "The depositors are nervous, the world
is watching. It illustrates the enormous complexity."