* Fisher says QE to end in October at current pace of
* Fisher is on his way to visiting senior economic officials
* Says balance sheet to remain 'quite large' after QE ends
* Discourages binding economic forecast commitments
(Adds quotes from Fisher speech in Hong Kong on China, US
By Michael Flaherty
HONG KONG, April 4 Political gridlock is slowing
U.S. economic growth, impacting the confidence and budgets of
businesses across the country, a top Fed official said here on
Dallas Federal Reserve Bank President Richard Fisher took a
swipe at U.S. politicians and their inability to cooperate, and
accused them of impeding jobs growth.
In a question and answer session following a speech he gave
at the Asia Society on forward guidance, Fisher referred to "our
feckless Congress and poor government leadership" needing to get
their act together.
"Someone has to provide the incentive to step on the
accelerator and move the economy forward. And right now they're
stepping on the brakes," he said. "And that's Democrats and
Republicans and the lower and the upper house and a president
that just don't work together. Until we have that, we will not
have the confidence we need to proceed."
Fisher added that if the U.S. had the right fiscal policy,
the country would have an "incredibly fast-moving economy".
On the subject of the Fed's projections for the market,
Fisher said the U.S. Federal Reserve must avoid being locked
into calendar-based policy commitments and instead ensure its
forward guidance is flexible enough to allow it to respond to
In his speech, Fisher said he worried that predictable
commitments were unsound policy as they could lead to false
complacency and market instability.
"I question if it is sound policy to remove all uncertainty
or volatility from the market," Fisher, a voting member of the
Federal Open Market Committee (FOMC), said in his speech.
"At its worst, I fear calendar-based commitments can lead,
perversely, to market instability by encouraging markets to
overshoot, as they appear to be doing in some quarters at
present," Fisher said.
His stance against specific guideposts was an apparent stab
at other Fed officials who have advocated such commitments - an
approach the U.S. central bank is backing away from in favor of
more qualitative measures.
The market's sensitivity to the Fed's timing forecasts was
in full view last month. Stock, bond, and currency markets were
hit hard by comments from Fed Chair Janet Yellen that an
interest rate hike could follow around six months after the
central bank ends its bond-buying stimulus, earlier than
investors had expected.
Fisher said based on the current pace of the taper, the
Fed's quantitative easing would end in October, and that even
after that is done, the central bank's balance sheet would
remain "quite large."
The Dallas Fed president said he was on his way to Beijing
where he was planning to meet with senior economic officials.
Part of the motive of the trip, he said, was to get a better
view of the reforms taking place and the impact that would have
on China's economic growth.
"My preference is that, ultimately, they (China) have an
open capital account, maybe by the time we tighten monetary
policy. And that market forces determine the value of their
currency," he said.
Yellen, like her predecessor Ben Bernanke, has offered the
markets forward guidance on policy to try to help people
understand the direction and thinking of the Fed.
"Those who think we can be more specific in stating our
intentions and broadcasting our every next move with complete
certainty are, in my opinion, clinging to the myth that
economics is a hard science," Fisher said.
The Fed is currently winding down its quantitative easing,
massive asset purchases that pump money into the economy.
Monthly bond buying has been cut from $85 billion to $55 billion
per month, a figure which Fisher, a long-time policy hawk, said
was "still somewhat promiscuous".
(Editing by John Mair and Richard Borsuk)