WASHINGTON (Reuters) - The Federal Reserve cannot do much more to shelter the U.S. economy if the country goes over a year-end fiscal cliff of tax hikes and government spending cuts, a senior U.S. central bank official said on Tuesday.
“It would be nice to have the fiscal authorities get their act together so we wouldn’t be dependent on monetary policy. There is a limit to what we can do,” Dallas Federal Reserve President Richard Fisher told CNBC television. “I do not see us as that safety net.”
The administration of President Barack Obama and his Republican opponents in Congress have 48 days left to figure out how to approach curbing the country’s deficit, or risk massive tax hikes and spending cuts that could cause another recession.
“You’ve got to have reasonable fiscal policy. The more we do ... the more it gives these guys who are our politicians the excuse not to do what we elected them to do,” said Fisher, who is not a voter on the Fed’s policy-setting committee this year.
Fisher is a self-described anti-inflation ‘hawk’ who says he would not have supported the central bank’s latest efforts to drive down high U.S. unemployment through a third round of bond-buying, so-called quantitative easing, or QE3, announced in September.
He also said inflation was not currently a threat, but emphasized that U.S. businesses would not start hiring in earnest until the uncertainty created by the future shape of fiscal policy was clarified by the country’s political leaders.
“Until we give (businesses) some clarity, they are just going to hold back. And if we just have temporary fixes to the fiscal cliff that just pushes out the envelope for indecision,” Fisher said.
Reporting By Alister Bull; Editing by Eric Beech and Tim Dobbyn