WASHINGTON Dec 30 Dallas Federal Reserve Bank
President Richard Fisher said his votes on the central bank's
policy panel in 2014 will reflect his concern that the Fed's
bond-buying risks stoking inflation and exposing the institution
In an interview conducted on Dec. 2 but posted to the
Internet as a podcast on Monday, Fisher called the excess
reserves piling up in the U.S. banking system potential "tinder"
for inflation, and he said the central bank's plans to
eventually unwind its extraordinary policies relied on an
untested "theoretical exit strategy."
"I expect that my own voting behavior will reflect this
concern I've just stated," Fisher said in the interview hosted
by the private educational foundation Liberty Fund. "I worry
about the fact that we've already painted ourselves into a
corner that's going to be very hard to get out of."
Fisher, who rotates into a voting spot on the Fed's
policymaking Federal Open Market Committee next month, expressed
concern that as interest rates rise the Fed could begin to face
paper losses on its massive portfolio.
"Will Congress remember that we made three years of
substantial profits if interest rates go up ... and the market
value of our portfolio declines?" Fisher asked. "My suspicion is
that they would turn on us once again," he added, referring to
the political attacks on the Fed in the wake of its efforts to
help banks threatened by the 2007-2009 financial crisis.
The Fed has held overnight interest rates near zero since
December 2008 and has roughly quadrupled its balance sheet to
about $4 trillion through three massive bond purchase programs.
On Dec. 18, the central bank said it would trim its bond
purchases to $75 billion in January from a previous $85 billion
per month pace as a first step toward winding the program down.
Officials will need to decide whether to trim the buying pace
further at their next meeting on Jan. 28-29.
Fisher has long been among the internal critics of the