March 23, 2011 / 1:51 PM / in 8 years

Fed's Fisher concerned about liquidity level

Richard Fisher, president of the Federal Reserve Bank of Dallas, answers a question from the audience after delivering the 2009 Albert H. Gordon Lecture about the current financial crisis at the John F. Kennedy School of Government at Harvard University in Cambridge, Massachusetts February 23, 2009. REUTERS/Brian Snyder

BERLIN (Reuters) - Dallas Federal Reserve Bank President Richard Fisher expressed concern on Wednesday about high levels of liquidity in the U.S. economy, and warned the Fed’s bond-buying program set it on a “dangerous course.”

Fisher, regarded by economists as one of the most hawkish policymakers at the U.S. central bank, said concern was already growing over the large amount of money in the U.S. system.

“There is an enormous amount of liquidity swashing around the U.S. economy and the U.S. financial system,” he said in a speech in Berlin. The current U.S. stock market rally was the third fastest in history, he added.

Criticizing the Federal Reserve’s policy of quantitative easing, Fisher equated the decision to buy $600 billion in Treasury securities with monetizing U.S. Treasury debt, and called it a “dangerous course to follow.”

Fisher was a vocal opponent of the bond-buying program when the Fed began it last November, but this year has not used his vote on the Fed’s policy-setting committee to oppose it. He defended that stance Tuesday in Frankfurt, saying the U.S. central bank should follow through on its promises.

The program is slated to continue through June, and Fisher has said he will oppose any extension.

Fisher said it was too early to tell what effect Japan’s earthquake, tsunami and nuclear crisis would have on the U.S. economy. However, he added: “I don’t think this is a long-term issue that affects the course of monetary policy.”

The crisis could create short-term price pressures on certain goods such as timber, he noted.

Writing by David Stamp; editing by Ron Askew and Jeffrey Benkoe

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