FRANKFURT (MNI) – Amid mounting inflation pressures worldwide, the
Federal Reserve’s ongoing expansive monetary policy poses risks for
price stability, according to Dallas Federal Reserve Bank President
Richard Fisher.

“U.S. firms have enough financial fuel in the tank to expand and
create jobs,” Fisher argued in an opinion piece in the German business
daily Handelsblatt published Wednesday. “Now that the Fed has completed
its job, I see predominant risks of too expansive monetary policy.”

“Our job is not at all to inflate away the debts of an
irresponsible government — or even to appear to do so,” he said.
“Historically, the central bank financing of deficits has always led
directly to an abyss. We should shut this door and throw away the key.”

“I see a risk that we will be unable to keep inflation under
control,” the central banker declared. “Growing price pressures are
evident throughout the world.”

“In the core of the Eurozone, in Germany, unemployment is lower
than before the crisis and wage pressures are pushing inflation toward
3%,” he noted. “Consumer prices in Britain are climbing above 5%, even
though unemployment is high. Moreover, we have more than 4.5% inflation
in China, 6% in Brazil and 8% in India.”

“In addition, we are hearing from firms in the U.S. and other
countries that they are trying to pass on price pressure from imported
commodities to their customers,” he added.

Along with the resurgence of “ugly” reminders of the financial
crisis, “all this shows that the nectar of easy money is being mixed
more and more with poison,” Fisher said.

It will not be easy to regain control of U.S. public finances, the
Dallas Fed chief conceded. “However, there are even worse alternatives.
Resorting to protectionism or capital controls or lasting negative
interest rates and inflation can only bring a pyrrhic victory.”

“And undermining the independence of the central bank would lead to
the same fate as in the Weimar Republic and Argentina, when their
central banks financed public debt,” Fisher warned.

–Paris newsroom +331 4271 5540; stephen@marketnews.com

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