The Federal Reserve has no business easing monetary policy further when the real problem facing the economy is fiscal mismanagement in Washington, a top Fed official said on Wednesday.
Speaking for the first time since his dissent last week on the Fed’s promise to freeze interest rates near zero for the next two years, Dallas Fed President Richard Fisher – known as an inflation hawk – said his main worry was not the possibility that easy policy could send prices spiraling higher.
Rather, he said, his worry is that the liquidity the Fed has already created is sitting on the sidelines as businesses and households delay spending amid uncertainty over tax and regulatory policy.
The Fed has kept interest rates near zero since December 2008 and has bought $2.3 trillion in long-term securities to support the economy, and yet job creation remains weak and the recovery meager, Fisher said.
The Fed last week extended its already super-easy monetary policy by promising to keep rates near zero through mid-2013, and said it was weighing other options to support a weak recovery.
Three Fed officials – Fisher, Minneapolis Fed President Narayana Kocherlakota, and Philadelphia Fed President Charles Plosser — cast their vote against the decision, the first triple dissent at the Fed since 1992.