Fed’s Fisher says ball is in ‘fiscal court,’ not Fed’s

HOUSTON, Sept 1 (BestGrowthStock) – The U.S. Federal Reserve is
committed to keeping the price of money low until the economic
recovery strengthens, but should not do more to boost growth
without fiscal and regulatory policies that support businesses,
a top Fed official said on Wednesday.

The Fed’s recent decision to keep its $2 trillion balance
sheet steady was an effort to put a halt to any “passive
tightening” that could impede recovery, Dallas Federal Reserve
President Richard Fisher told a group of business leaders.

But he said he would be reluctant to expand the Fed’s
balance sheet further, because to do so would at best be
ineffective and at worst fuel the fires of future inflation.

“I believe that monetary accommodation alone cannot buy
happiness,” Fisher said in the text of remarks to the Greater
Houston Partnership.

Sounding a theme he has expanded on before, Fisher said
businesses are holding back on investments because of
uncertainty over the cost of future regulation, such as that
mandated by U.S. healthcare reform, and over the country’s
fiscal direction and future taxes.

“For me, the ball is in the fiscal court for now,” he said.
“Any further action by the Fed must be subject to the kind of
rigorous cost-benefit analysis that Ben Bernanke cited in
Jackson Hole. One of the variables that must be taken into
account is whether fiscal and regulatory policies are conducive
to growth.”

Fisher, who rotates into a voting spot on the Fed’s
policy-setting Federal Open Market Committee next year, did not
say whether the fiscal policies he views as desirable included
further fiscal stimulus, as some prominent policy-makers have
advocated.

The Fed’s programs to alleviate a deepening recession and
credit crisis in 2008 by cutting interest rates to near zero
and buying mortgage-backed and other securities were
complemented by huge amounts of government stimulus whose
effects are now beginning to wane.

In the past, Fisher has spoken extensively about the threat
of the U.S. fiscal deficit, a point that was absent from
Wednesday’s speech.

Fiscal and regulatory initiatives need to be aligned with
the needs of businesses, he said in the speech. And while the
Fed will use all tools in its power to boost confidence in the
economy, “it is important to recognize that we cannot do it
alone,” he said.

“The best way to leverage the influence of monetary policy
is to have fiscal and regulatory policy that complements,
rather than counters, the impact we might have in helping the
economy get back on the course of sustained, noninflationary
growth.”

For more stories on Fed policy go to [FED/AHEAD]

(Reporting by Ann Saphir, Editing by Chizu Nomiyama)

Fed’s Fisher says ball is in ‘fiscal court,’ not Fed’s