Fed's Fisher: Congressional Dysfunction Is Hurting Job Creation

Wednesday, 08 May 2013 01:22 PM

By Newsmax Wires

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The Federal Reserve's extremely accommodative monetary policy has not been as effective in creating jobs as it could be because the U.S. Congress has not provided enough clarity on tax policy, a top Fed official said on Wednesday.

"Inflation is not an issue ... I don't think you can say inflation is doing any damage to the economy," said Dallas Federal Reserve Bank President Richard Fisher when asked in an interview on CNBC what is holding back the economy.

"We have great potential in this country, and it's not being realized because the politicians are holding us back," he said.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

"The question why aren't we getting job creation, I think we do know the answer: fiscal policy," he said. "You cannot make decisions under conditions of total uncertainty. We have a massive fog here, our businesses are well structured from a financial standpoint. Our companies are rich with cash, there's a lot of cash sitting on the sidelines," he said.

"Why hasn't this been going into the economy? The answer, I think, is pretty clear, but I think it's clear to everybody now," he said. "The fault lies with the fiscal authorities and until they get their act together, give us some certainty, I don't think we're going to get the kind of growth we'd like to see," he said.

Meanwhile, Fisher said the Fed needs to set a limit on the size of its assets, and that he favors reducing purchases of mortgage-backed securities in any tapering of bond-buying.

“There somewhere have to be practicable limits in terms of how far we build our balance sheet,” Fisher said. “We’re moving in the direction of having a $4 trillion balance sheet so we know we can’t go on forever.”

The Federal Open Market Committee said May 1 that it is prepared to accelerate or slow the pace of its monthly bond-buying in response to changes in the labor market and inflation. Purchases of $40 billion a month in mortgage-backed securities and $45 billion of Treasurys have swollen the Fed balance sheet to $3.32 trillion.

“We’ve had a rebound in housing,” Fisher, who doesn’t vote on monetary policy this year, said of the impact from Fed purchases of mortgage bonds. “It’s done its job and we’re at risk of overkill. And we’re accumulating so much, the question is what do we do with it?”

Policy makers pledged last week to keep buying $85 billion per month in a program aimed at bolstering growth and reducing the unemployment rate, which last month fell to 7.5 percent from 7.6 percent.

In its previous gathering held on March 19-20, several FOMC officials said the central bank should begin tapering its program later this year and stop it by year-end, minutes of the meeting showed.

Fisher has been among the most vocal opponents of additional easing at the Fed, saying monetary stimulus will do little to encourage businesses to hire.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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