United States Federal Reserve Bank of Dallas president Richard Fisher again sharply criticised Congress for its handling of fiscal policy, and indicated that the central bank hadn't yet finalized "tapering" plans even as it prepares to "dial back" on bond purchases.
"We've begun to socialise the idea that there is no 'QE' infinity--this doesn't go on forever," Mr Fisher said, referring to the Fed's $US85 billion in monthly bond purchases also known as quantitative easing, or QE. Asked when the gradual exit from quantitative easing would begin, Mr Fisher replied "it's up to the group when we will start dialling back."
Speaking at a luncheon hosted by financial-industry trade group the Dallas Estate Planning Council at the Dallas Country Club, Mr Fisher said the central bank has done all it can to stimulate the US economy. He said members of Congress--both Republicans and Democrats--have failed to do their part. Elected officials have "sold our children--and our grandchildren--down the river," Mr Fisher said.
"We haven't had a budget for five years; no one knows what their taxes are going to be; no one knows what spending is going to be."
The Dallas Fed president has long maintained that the missing ingredient in the economic recovery is a sound fiscal policy. He argues that deadlock in Washington over a budget plan has created a "fog" of uncertainty. Poor visibility makes it difficult for business owners to plan expansion and hiring, Mr Fisher noted.
Responding to a question from the audience, Mr Fisher said "Obamacare" health-care reform is currently a "weight" on the outlook for corporate growth.
"In our surveys of businesses...no one can figure out what it's going to cost them," Mr Fisher said.
Similarly, Mr Fisher said, the Dodd-Frank financial overhaul had failed. The stated aim of the legislation was to bring an end to a regime in which certain banks were "too big to fail," he said. Yet more financial assets are concentrated in fewer hands than ever before, Mr Fisher said. He proposed an alternative solution--a requirement that banks sign a disclaimer attached to transactions, saying they would not accept a government bailout to cover any losses.
Mr Fisher said Fed policy is necessary but not essential for promoting job growth. He said employment-market support should no longer be one of the Fed's mandates. The "dual mandate" of employment creation and inflation control have been part of the Fed's mission since 1977.
Regarding inflation, Mr Fisher said he doesn't see any inflationary pressure in the short term. He warned that the Fed's multitrillion-dollar bond holdings could become "inflationary tinder" as the bank unwinds its quantitative-easing policy. While Mr Fisher and other central-bank officials want to lend out the money accumulated from these programs, the Fed official said such an action could flood the economy with cash, stoking inflation.
Mr Fisher said strong auto sales and other positive signs in the private sector suggest the nation's economic growth is increasing. But, there is "still a long way to go" to reach full employment, he cautioned.