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Fed's Fisher says stimulus tapering should begin this fall

August 05, 2013|By Jim Puzzanghera
  • Richard Fisher, president of the Federal Reserve Bank of Dallas, speaks during a House Financial Services Committee hearing in Washington in June.
Richard Fisher, president of the Federal Reserve Bank of Dallas, speaks… (Andrew Harrer / Bloomberg )

WASHINGTON -- Federal Reserve policymakers must “gird our loins” to start tapering the central bank’s bond-buying program this fall after the drop in the unemployment rate to 7.4%, a top official said Monday.

Richard Fisher, president of the Federal Reserve Bank of Dallas, likened the central bank’s stimulus efforts to “a monetary Gordian Knot” -- a complex tangle of programs that must be “gingerly” unwound to avoid havoc in financial markets.

The process needs to start soon, said Fisher, who in June said the Fed should not live in fear of pulling the plug on what he dubbed “monetary cocaine.”

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A non-voting member of the policymaking Federal Open Market Committee, Fisher said in a speech Monday that he wants to “stop building upon the knot” by starting to reduce the $85 billion in bond purchases the central bank has been making each month for nearly a year.

Fisher said he pushed in June for Fed Chairman Ben S. Bernanke to signal at his quarterly news conference that the $85 billion in monthly bond-buying would be scaled back.

Bernanke did, saying the Fed would start the reduction later this year as long as the economy and unemployment rate continued to improve as forecast.

At last week’s FOMC meeting, Fisher said he “suggested that we should gird our loins to make our first move this fall.”

A fan of colorful language, Fisher used an old saying that refers to preparations for a difficult battle.

It was unclear whether a majority of the commission supported the idea of acting this fall, Fisher told the annual conference of the National Assn. of State Retirement Administrators in Portland, Ore.

With the unemployment rate dropping in July to its lowest level since December 2008, "I would say that the committee is now closer to execution mode, pondering the right time to begin reducing its purchases, assuming there is no intervening reversal in economic momentum in coming months," Fisher said.

But his view isn't universally held.

On Friday, James Bullard, president of the Federal Reserve Bank of St. Louis, indicated he wasn't prepared to start reducing the purchases.

"The committee needs to see more data on macroeconomic performance for the second half of 2013 before making a judgment on this matter," Bullard, a voting member of the FOMC, said in a speech.


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