Tags: fisher | inflation | fed | rate

Inflation-Hawk Fisher Backs Big Fed Move

By    |   Thursday, 18 Dec 2008 05:26 PM

One of the Federal Reserve’s biggest inflation hawks has turned at least temporarily into a dove.

Dallas Fed President Richard Fisher, who earlier this year voted to hike rate, now says the Fed will pull out all the stops to bring the economy and credit markets back to life.

The Fed cut rates to virtually zero this week and said it would take unprecedented steps to put money into the economy, under normal circumstances gasoline on the fire in terms of inflation risk later on.

Fisher nevertheless is on their side.

“We will not shy away from pursuing every practicable means of supporting financial markets and stimulating the economy by employing new techniques,” Fisher said in a speech Thursday.

And what action is the Fed prepared to take?

“We stand ready to grow our balance sheet even more,” Fisher says.

“For example, we will expand purchases of mortgage-backed securities, should we feel such purchases would be productive.”

Fisher says he is now more worried about deflation than inflation.

“Price pressures now are in the other direction,” he says.

“We have to do everything we can to lift the economy up and prevent deflation from taking (hold).”

Fisher predicts that the economy will shrink 4 percent to 5 percent this quarter and continue contracting until the second half of 2009, thanks to slumping industrial output and consumer demand.

Many experts approve of the Fed’s effort to jumpstart the economy and financial markets.

“It's a highly unorthodox and creative step,” Michael Woolfolk, senior currency strategist, at Bank of New York-Mellon, told Reuters.

“We think it's the best possible move for the U.S. consumer and for financial markets.”

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One of the Federal Reserve’s biggest inflation hawks has turned at least temporarily into a dove. Dallas Fed President Richard Fisher, who earlier this year voted to hike rate, now says the Fed will pull out all the stops to bring the economy and credit markets back to...
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2008-26-18
Thursday, 18 Dec 2008 05:26 PM
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