Federal Reserve Bank of Dallas President Richard Fisher said the US economy faces a "slow slog" and further monetary accommodation may not revive businesses "dispirited" by tax and regulatory changes.
"No amount of further monetary accommodation is going to do the trick," he said in response to audience questions after a speech today in San Antonio. "We'll be pushing on a string, in my opinion."
The regional Fed chief, 61, said he expects growth below 3 percent for a "prolonged period," buttressing the Fed's Beige Book business survey yesterday which showed the recovery slowing in some areas over the past two months. The number of Americans filing first-time claims for unemployment insurance was 457,000 last week, a figure that signals the labor market will be slow to improve, Labor Department figures showed today.
"We continue our slow slog out of what proved to be a most hellish downturn in 2008 and 2009," the bank president told the Greater San Antonio Chamber of Commerce.
"I fear the nation's economy will be sailing forward at suboptimal speed, despite the fact that the cost of borrowing is low, equity markets have shown resilience, and liquidity is plentiful," Fisher said. He doesn't vote on the rate-setting Federal Open Market Committee again until 2011.
Minutes of the FOMC's most recent meeting in June show officials open to the possibility of taking new actions to stimulate the economy, should the outlook worsen. Policy makers at the gathering retained their pledge to keep the benchmark interest rate at a record low for an "extended period" and signaled that Europe's debt crisis may harm American growth.
Resume Purchases
Fisher's comments today appear to place him closer to the views of Fed presidents such as Jeffrey Lacker of Richmond, who said on July 12 that any consideration of further easing is remote. James Bullard, head of the St. Louis Fed, said earlier today that the central bank should resume purchases of Treasury securities if the economy slows and prices fall.
The Fed "did manage to stave off what otherwise would have been deflationary forces," Fisher said to reporters after the speech. "We're still seeing slightly increasing prices," Fisher said, adding he doesn't "see any deflationary net pressure."
Businesses "are increasingly distressed by the lack of consistent direction coming from Washington," Fisher said. "They are confused and dispirited by random refereeing." It's possible "further monetary accommodation might make the situation worse" if the Fed is seen as "politically pliable" and "prone to substituting such accommodation for fiscal discipline."
'Provide the Stuff'
"As long as our economic players, businesses and consumers, are beset by unmanageable uncertainty, they will refrain from making decisions that provide the stuff of economic growth," he said.
Fisher reiterated his view that the Fed will not "monetize" the nation's debt by effectively printing money to finance the shortfall.
The banking industry "appears to be on a very slow mend," and yet "uncertainty reigns," he said.