Fed’s Fisher Says U.S. Inflation Trending Toward 2% Not a Concern for Now

Federal Reserve Bank of Dallas President Richard Fisher said U.S. inflation is trending back toward the central bank’s informal target of about 2 percent and isn’t a concern now for policy makers.

“Right now I don’t think inflation is a threat,” Fisher said in a speech to the Texas Tech Alumni Association in Dallas. “I am looking forward to the day I can advocate tightening monetary policy,” he said, because it would likely be in response to a stronger economy and increased employment.

Fed officials have differed this week on whether to increase stimulus to reduce 9 percent unemployment, which Fed Chairman Ben S. Bernanke said Nov. 2 “remains on the table.”

Federal Reserve Bank of New York President William C. Dudley said yesterday there’s more the Fed could do to boost the economy, such as providing clearer guidance on how long interest rates will stay low or resuming asset purchases. The St. Louis Fed’s James Bullard said it would take a deterioration in the economy to warrant more easing because action risks a rise in inflation.

Fisher, who voted against Fed stimulus measures in August and September, said his view was “we have done enough” with monetary policy, though it is too early to tighten. A $2.83 trillion central bank balance sheet risks inflation in the future, he said.

Taxes, Regulations

The Dallas Fed leader said more stimulus would be ineffective because businesses have held back hiring out of concern for U.S. fiscal policy, the tax system and regulations such as an overhaul of health-care system.

“No one wants to see 9 percent official unemployment and the extensive underemployment,” Fisher said. Businesses are “in a defensive crouch,” he said. “We are in a stasis.”

Fisher was critical of both Democrats and Republicans, saying the parties have contributed to sending the country “into a ditch.”

“We need to completely reboot our fiscal policy,” Fisher said. “We have to compete in terms of our tax regimes and the incentives we provide for business.”

In contrast, Bernanke, Dudley and Chicago Fed President Charles Evans have said monetary policy could be eased further to spur the recovery. Evans has urged the Fed to keep the target for the benchmark U.S. interest rate near zero until either unemployment falls below 7 percent or the medium-term inflation outlook rises above 3 percent.

Better Than Forecast

Data in recent weeks have been better than forecast by economists, suggesting the economy is picking up even more this quarter. The Conference Board’s index of U.S. leading indicators had its the biggest jump since February, the New York-based group said today.

Retail sales in October rose 0.5 percent, helped by the largest increase in electronics purchases in two years, while industrial production expanded 0.7 percent, reports showed this week. Building permits, a sign of future construction, rose 11 percent while housing starts fell a less-than-forecast 0.3 percent, a Commerce Department report showed.

To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net

Darrell Preston in Dallas at dpreston@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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