–Sober Data No Harbinger of Double Dip; May Temper Exit Strategy Pace

By Claudia Hirsch and Steven K. Beckner

NEW YORK (MNI) – Dallas Federal Reserve Bank President Richard
Fisher Monday said U.S. growth should accelerate in the second half of
the year, though recent sobering economic signals may spark central bank
discussion about adjusting the speed at which the Fed eventually exits
its extraordinarily accommodative monetary policy.

“I don’t believe personally we’re going into a double dip,” Fisher
said, answering audience questions at a seminar hosted by Market News
International. “I believe we’re going to have accelerating growth going
into the second half.”

Fisher, a voting member of the Fed’s policymaking Open Market
Committee, said he sees second-half GDP moving above 3.0% and inflation
slowing. He described recent headline inflation as a “short-term
phenomenon” but described higher food, energy and apparel prices as
“retarding” consumption.

“We’re cruising along at a less-robust speed,” said Fisher, a noted
inflation hawk who opposed the Fed’s second round of quantitative
easing, or QE2, which the central bank is wrapping up this month.
Echoing his recent remarks that any further juice the economy may need
must come from a source other than the Fed, Fisher made plain Monday
that he doesn’t see a QE3 as imminent.

“I personally … just don’t foresee additional accommodation,” he
said, when asked about last week’s string of disappointing economic
data, which cumulated in Friday’s report of only modest job gains in May
and an uptick in the unemployment rate.

“I do see continued discussion of exit strategy,” Fisher said, and
added that the FOMC may “temper the pace depending on the economy.”

Regarding the unwinding of current monetary policy, he said the Fed
has more tools in its “kit” than simply adjusting the interest rate paid
on excess reserves, and that the Fed’s ultimate goal is to return to the
“normalization of monetary policy at the right time.”

Here again, he said, the pace at which the central bank’s
securities portfolio and monetary policy rights itself will depend on
“how the economy unfolds.”

Among the headwinds to U.S. growth are supply disruptions from
Japan’s devastating March earthquake, tsunami and resulting nuclear
crisis, Fisher said, particularly in automotive and electronics-making
sectors. But he said disruptions in his district are already “gradually
being reduced.”

In his prepared remarks, Fisher warned that the Dodd-Frank
financial regulation law could have the “perverse outcome” of
exacerbating the too-big-to-fail problem and lead to an even more severe
future financial crisis.

The new rules could put cost burdens on smaller and regional banks,
leading to further concentration in the banking industry and encouraging
the growth of even bigger financial institutions. Fisher said so-called
“enhanced-supervision” requirements should be imposed mainly on banks
with assets of $300 billion or more.

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

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