Fed's Fisher says economy weathering storm

WASHINGTON (Reuters) - Dallas Federal Reserve Bank President Richard Fisher on Monday said the U.S. economy appears to be weathering troubles in housing and financial markets, but it was uncertain how things will play out.

"Our economy appears to be weathering the storm thus far. The future path of that storm and the appropriate policy course, however, are still to be determined," Fisher said in remarks prepared for delivery to a community forum in Laredo, Texas.

A text of his remarks was provided to reporters in advance of delivery.

His comments come after a report on Friday showed the U.S. economy shed jobs outside of the farming sector during August, the first decline in four years.

Fisher, who is not a voting member this year on the Fed's interest rate-setting panel, said new regulations would be more likely to resolve troubles stemming from the subprime mortgage lending boom than policy moves by the central bank, adding that it was not the Fed's job to protect risk takers.

"I do not believe the Federal Reserve's job is to protect specific risk takers who failed to protect themselves from potential downside wounds," he said. "The Federal Reserve's job is to protect the system itself."

"In my humble opinion, the standard tools of monetary policy are insufficient, by themselves, to deal with the subprime market fallout," he added.

He emphasized the goal of the Fed is to achieve long-term, noninflationary economic growth.

"I set aside the passions of the moment and the conventional wisdom in the markets and keep a steady focus on the Fed's mission," he said. "Conducting monetary policy is not a popularity contest."

Financial market participants widely expect the Fed to cut interest rates at a meeting on September 18 to protect the economy from a sharp housing market downturn and related strains in credit markets, with some economists looking for a hefty half-percentage point reduction.