“Our debt burden is larger than that of Europe. We are headed in the wrong direction,” Fisher told the Dallas/Fort Worth Minority Supplier Development Council. “If we don’t bring it under control, we will have social unrest.”
Fisher said the Federal Reserve would not allow inflation to rise as a way to cushion the impact of rising deficits. The U.S. lost its last stable outlook from the three-biggest credit- ranking companies when Fitch Ratings lowered the nation’s outlook to negative on Nov. 28 following the so-called congressional supercommittee’s failure to agree on deficit cuts.
“Deficits matter for what we do at the Fed,” Fisher said. “Economists have found structural deficits raise long-term interest rates” and “create political pressure” on central banks.
“Running the printing presses to pay today’s bills leads to much greater problems,” including a surge in inflation. “We will never let that happen at the Federal Reserve, never,” he said. “Stable prices go hand in hand with achieving sustainable growth.”
In a brief discussion of monetary policy, Fisher repeated that there is little more the U.S. central bank can do to accelerate growth, which he said has been restrained by uncertainty over fiscal policy, tax rates and regulations.
Too Many Unemployed
“There are too many people out of work, too much unemployment, too much underemployment,” Fisher said. At the Fed, “We have filled the gas tank. Someone has to press on the accelerator” with fiscal and regulatory policies.
The Dallas Fed president has been among the most vocal critics of the central bank’s policy, dissenting this year against moves to push down long-term rates and to keep the benchmark U.S. interest rate near zero until at least mid-2013. He voted five times in 2008 in favor of tighter policy.
Fed officials have differed on whether to increase stimulus to reduce persistent unemployment, which Fed Chairman Ben S. Bernanke said Nov. 2 “remains on the table.”
To contact the reporter on this story: Steve Matthews in Atlanta at firstname.lastname@example.org
To contact the editor responsible for this story: Kevin Costelloe at email@example.com