Fisher says Fed will not countenance inflation
The Federal Reserve will not allow inflation to get out of control and is aware of the danger that a weaker dollar could feed into higher prices, one of its top policy-makers said on Tuesday.
“We want to make sure the message is clear … that we will not countenance building inflationary expectations,” said Federal Reserve Bank of Dallas President Richard Fisher.
“We are witnessing a negative feedback loop … which is that a weaker dollar can lead to further inflationary pressures which in turn leads to a weaker dollar, et cetera, and to dampened economic activity,” he said in response to questions after a speech at the Council on Foreign Relations.
Fisher, a voting member of the Fed’s interest rate-setting committee this year, has dissented at the last three policy gatherings in favor of either smaller rate cuts than were agreed, or because he wanted no cut at all.
He said he had drawn the line at 3.5 percent, whereas the Fed has gone on to lower its benchmark overnight funds rate to 2 percent to shield the U.S americashadvance. economy from a housing crisis, and made plain he was uncomfortable with inflation expectations.
“The anecdotal evidence, the headlines that we’re reading in the newspapers, and the survey data, is not encouraging,” he told the audience.
“That worries me a great deal. It’s beginning to work its way into expectations, and when you begin to work your way into expectations, business and consumers behave accordingly and then you have a problem.
“So you want to make sure that is not encouraged and we will do the level best we can to do so,” he said.