BERLIN (Reuters) - Signs have emerged that U.S. businesses are passing on higher costs to consumers and the Federal Reserve must be “extremely wary” that price pressures don’t build as they seem to be doing in parts of Europe, Dallas Federal Reserve Bank President Richard Fisher said.
In an interview with Reuters in Berlin, Fisher also said the Fed must be prepared to take steps to offset high oil prices if it became clear that they were becoming a permanent feature of the U.S. economy.
“We are going to have to be extremely wary and vigilant on this front to make sure that this doesn’t take grip in the United States as it has apparently in the case of England and possibly within the EC,” Fisher said, referring to general price pressures.
Fisher, seen as a leading inflation hawk, also warned that investors could begin demanding higher interest rates on U.S. debt if U.S. lawmakers did not “get their act together” and map out a credible fiscal plan.
“At some point the markets will vote against it. Thus far they’ve been tolerant and also we’ve benefited from a rush to quality,” said Fisher, who is a voter on monetary policy this year.
“But I wouldn’t trust that for too long. We have to get our act together and to me that is the responsibility of the fiscal authorities. The Fed has done its job.”
Earlier, at a lunch with a small group of reporters, Fisher said that Spain was doing “a very good job” in pushing through economic reforms to restore confidence in its finances.
“I think Spain will surprise people,” he said, stressing that it was important to distinguish Spain from other troubled euro zone countries like Greece and Portugal.
“I think markets are not taking this into consideration enough,” he said.
Reporting by Noah Barkin