By Steven K. Beckner

NEW YORK (MNI) – Dallas Federal Reserve Bank President Richard
Fisher said Wednesday that he expects the Fed to complete the $600
billion of longer-term Treasury securities purchases it announced,
barring unexpected economic developments.

Fisher, talking to reporters following a luncheon address to the
Manhattan Institute, didn’t say whether or not he would dissent against
continued or expanded quantitative easing as one of this year’s Federal
Open Market Committee voters. But he said in his speech that he “would
be wary of further expanding our balance sheet.”

Fisher declined to blame recent commodity and other price pressures
on the Fed’s easy money stance, but said it might be one “cost” of the
policy.

He reiterated that the Fed has reached “the limit” of what it can
do to boost the economy and that it is now up to tax and regulatory
authorities to provide stimulus.

“I expect, barring any significant changes in the data that the
(QE) program announced in November will be carried through,” Fisher
said.

Asked if there were any data in particular he would be looking at
to determine what the Fed should do, Fisher replied, “we have to look at
all kinds of data.”

“We need to see what’s happening in terms of job growth but also we
need to keep our eye on the inflation data,” he said.

“I look at little intangibles,” he added. For example, “I’m
beginning to see mall traffic” — a sign of more discretionary
spending. He also pointed to stronger consumer spending and purchasing
managers numbers.

“There is some traction in the economy,” he said, but he added,
“it’s not sufficient to bring down unemployment fast enough given the
predicament we’re in.”

“There is only so much monetary policy can do now,” he continued.
“The ball is in the other court — the fiscal court.”

Asked by Market News International whether there is a link between
rising oil and other commodity prices and monetary policy, Fisher said
that prices are primarily being driven by “substantial demand” as well
as “idiosyncratic factors,” such as weather.

“Demand is being driven by voracious hunger in parts of the world
like China, which are net new additions to demand,” he said.

“One could make the argument that to a degree there is speculative
activity,” Fisher went on, saying that “the fact that money is
inexpensive and widely available (means) people are taking risks they
wouldn’t otherwise take.”

But he “wouldn’t necessarily… buy theory put forth by China and
others that’s it’s all the Federal Reserve’s fault.”

As to whether the Fed’s lax credit policies are generating new
financial imbalances or bubbles, Fisher observed that Kansas City Fed
President Tom Hoenig is “concerned about land prices in the midwest and
elsewhere. And so there is some evidence there.”

“What the Fed has to do is balance out costs and benefits, and some
of the things both of you just cited may well be costs associated with
the polices we pursued,” Fisher said.

“The question is what are the benefits?” he continued. “We’ve
lifted the tide I believe. The gas tanks are pretty full. The question
is what gets these folks off the docks and propelling themselves
forward, and now I want to reemphasize that it’s up to the fiscal and
regulatory authorities to get that done.”

If fiscal and regulatory steps are taken to improve the economy,
there “will be better income because people will be employed.”

Then “there will be a virtuous cycle,” he said, adding, “I think
we’ve stopped the vicious cycle.”

Earlier, in response to a question from the audience, Fisher
asserted, “We won’t buy municipal government securities.” he added, “The
Chairman made that very clear, and I second it.”

Regarding the spike in bond yields that has occurred since the Fed
announced QE2 on Nov. 3, Fisher said that is “not all that bad” to the
extent it reflects an improved economic outlook.

He said “the real issue here is to what extent do we continue this
process. The market has already begun to discount a bit that this won’t
go on forever.”

** Market News International New York Newsroom: 212-669-6430 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,M$$BR$]