–Fisher: Not Worried on Short-Term US Dollar Moves

By Sheila Mullan

NEW YORK (MNI) – Dallas Fed Pres. Richard Fisher Tuesday shied away
from speculating about details of any QE2 decision by the November FOMC.

Fisher declined to discuss QE2 prospects and when asked
about a $100 billion size by a reporter, said that figure was just a
hypothetical figure.

He spoke to reporters after a meeting of the New York Association
for Business Economics.

Fisher also noted that the prior QE bonds purchases had aided
the U.S. markets during the financial crisis and added that, “We would
have been a good deal worse off without it.”

He noted that the Treasuries amount at the Fed is “almost back to
where it was, before the crisis” and added further that a “large tranche
of MBS was being paid down over time.” The fact is, “We are still
discussing this QE2,” he said.

Fisher noted that he respects opposite views to his on the FOMC,
including that of Kansas City Fed President Thomas Hoenig and also
others with the opposite view and noted that Boston Fed Pres. Eric
Rosengren has “valid arguments, as well, on what will work” to create
jobs.

He also noted that QE2 is “still in discussion” and the Fed “has to
decide how much of the current” economic problems “is monetary policy
and how much is other factors.”

He also said that further fiscal reform is needed, “Otherwise it
renders the Fed action ineffective”.

He noted there were currently “price pressures from commodities”
and cotton prices are at the highest recently since 1836 while “other
data points” back up such price pressures. He added that he is seeing
“cost-push pressures” and seeing “margin” pressures and added that
company officials in the U.S. are “using surplus cash to buy their
stocks back” and other moves “until they are confident they can grow
their top line.”

He said in Q&A with the audience that there is “sufficient
liquidity for creditworthy borrowers” and added that when the Fed is at
the “zero bound” of rates. The question from there, he said, is how to
make policy more accommodative.

Regarding gold, he said its rise is “due to the U.S. dollar
decline” and was a sign of “discomfort” and fear of inflation. He added
that he does “worry too much about” the gold rise but added that it
showed either discomfort with U.S. policies and perhaps European
policies. “There is discomfort with someone somewhere, and I hope it is
not us,” he added.

He added that, “We do discuss” whether to continue to pay interest
on excess reserves.

He noted that, “We don’t have an inflation target at the Federal
Reserve” because “if we put an inflation target on the table, Congress
will say, where is the growth target.” He noted that only one country,
Sweden in the 1930s, tried “to target rates with questionable success
and only one Fed individual backs that idea.”

He also added that there is “scope for the Treasury and fiscal
authorities to incentivize jobs hiring.” He also added, “don’t
assume the Fed can carry the load” alone.

Fisher said the current home foreclosure logjam amid legal and
logistical questions “prevents that housing market from clearing.”

Fisher downplayed concern when asked about dollar weakness. “I want
to be very careful not to read” too much “into short-term moves,” he
added, saying, he is “not worried about the short-term trends in the
U.S. dollar.” He added that the U.S. dollar is the “key currency in
the world.”

– By Sheila Mullan, 212-669-6432 smullan@marketnews.com

** Market News International New York Newsroom: 212-669-6430 **

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