December 17, 2009 / 7:00 PM / 10 years ago

UPDATE 2-Fed's Fisher says U.S. inflation not a worry

(Adds comments, details, background)

By Pedro Nicolaci da Costa

LITTLE ROCK, Ark., Dec 17 (Reuters) - Dallas Federal Reserve Bank President Richard Fisher said on Thursday the latest U.S. inflation figures were still mild, underscoring the central bank’s commitment to keeping interest rates low.

“I don’t see anything yet that ruffles my hawkish feathers,” Fisher told reporters on the sidelines of a conference sponsored by the Little Rock Chamber of Commerce.

Consumer prices turned higher in November on a year-ago basis for the first time since February, rising 1.8 percent. However, the gains were due in part to energy price rises that have since abated.

Fisher said the U.S. economy would likely grow between 3 percent and 4 percent in the fourth quarter, following the third quarter’s 2.8 percent increase.

The third quarter marked the first bout of expansion in a year as the United States emerged from the worst slump since the 1930s.

The longer-term outlook, however, is more uncertain. Fisher said growth prospects could be subdued for some time to come.

“Businesses are still reluctant to add to payrolls,” he said.

Oil prices reached $82 a barrel in late October but have since come down and on Thursday were trading near $72.50.

Fisher said the labor market was still weak despite recent signs that the pace of job losses was slowing, and that the weakness could persist if small business activity did not pick up.

During a panel discussion, Fisher argued that deficits presented a long-term challenge for the country, saying they could eventually drive borrowing costs higher.

He said it was important to fight any impression that the Fed would “monetize” or fund such deficits, which he affirmed the central bank would not do. (Reporting by Pedro Nicolaci da Costa; Editing by Leslie Adler and Dan Grebler)

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