Fed’s Fisher says central bank has ‘done enough’

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brian milner
Globe and Mail Blog
Posted on Monday, October 24, 2011 1:05PM EDT

It’s time for the Federal Reserve to sit back and “digest” the impact of its numerous interventions to get the sluggish U.S. economy moving again, says Richard Fisher, the hawkish president of the Federal Reserve Bank of Dallas.

“We don’t have to act at every meeting and we certainly don’t have to react at every meeting,” Mr. Fisher said after a speech Monday to a Toronto conference focusing on global urban issues. He fears that the costs exceed the benefits of further Fed intervention. “We have done enough.”

The Federal Reserve has “reliquified” the economy in the face of criticism from some people, “including me,” he told an audience of business people, politicians and bureaucrats. Today, “the gas tank is full.” The problem is “how to get people to step on the gas pedal.”

Mr. Fisher, an outspoken critic who voted against the Fed’s latest “twist” policy to bring down long-term interest rates, lays the blame for the current U.S. economic woes on the failings of U.S. fiscal policy. Businesses won’t invest in job-creating activities without a clear sense of what fiscal policies will look like.

Instead, both Democrats and Republicans prefer to wait on the sidelines, rather than provide some leadership and clarity. “The central bank cannot do it alone,” he said. What’s worse, “it lets the politicians off the hook.”

The fiscal authorities “are dysfunctional in the United States.”