Dissension at the Fed? A Critic of Easy Money Speaks His Mind

Federal Reserve Bank of Dallas President Richard Fisher doesn’t vote on policy this year, but that hasn’t stopped him from vocalizing his dissent from the Fed’s current course of monetary easing. In a speech on Wednesday in San Marcos, Texas, Fisher remarked that, “No amount of monetary accommodation will change the pathology that businesses face. Excessive monetary accommodation might only add a further dosage of angst, fueling fears of future inflation.”

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“The greatest impediments to investing in and creating jobs in the U.S. are the current tax code and regulatory burden and uncertainty, as well as lagging workforce skills,” Fisher said, adding that, “No one — business operator, worker, or consumer — can plan for the long term with confidence until the federal government removes the angst that is associated with runaway deficits and unfunded liabilities that threaten to drown our economy in debt.”

In the minority among Fed leaders, Fisher is calling for more fiscal policy and less monetary policy to fight unemployment. Fiscal policy is formulated and implemented by Congress, and has for decades taken a back seat to monetary policy run by the Fed, which can be designed and implemented much faster.

Fed Chairman Ben Bernanke has come under fire lately for easy money policies — and low interest rates — that his institution has held for the last few years. Many critics now say that the Fed’s dual mandate to maximize price stability as well as employment is too heavily biased towards the latter, and as a result, is dangerously courting inflation.

Fisher clearly shares that view, but the annual consumer price inflation rate stands now at about 2.4 percent. The Fed recently gave an official inflation target of 2.0 percent. Unless inflation begins to rise quickly, Chairman Bernanke is likely to hold to his current position regardless of his critics, as inflation has so far proven manageable.

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