Federal Reserve Bank of Dallas President Richard Fisher said the Bank of Japan (8301)’s unprecedented stimulus doesn’t put pressure on U.S. monetary policy makers to continue with their bond-buying program.
The BOJ plans to purchase 7.5 trillion yen ($78.6 billion) of bonds a month and double the monetary base, which includes cash in circulation, in two years, the central bank said in Tokyo today. That exceeded economists’ median estimate of 5.2 trillion yen a month and is the biggest move since quantitative easing began in 2001.
“Does it put pressure on us to continue?” Fisher responded on Bloomberg Television’s “Market Makers” program when asked whether the Japanese move will pressure the Fed to continue its quantitative easing program. “No, we have to conduct monetary policy according to what we feel is best to get our economy moving.”
Fisher said it’s not the Fed’s role to “approve or disapprove” of the BOJ action, saying “they have to conduct policy the way they want to conduct it.”
The FOMC in March said it would continue buying securities at a rate of $85 billion per month, and will keep buying until the labor market improves “substantially.” The purchases have expanded the central bank’s balance sheet to about $3.2 trillion.
“You can condition the behavior and motivate the behavior by applying that kind of drug,” he said. “It doesn’t go on forever, because otherwise you will kill the patient.”
Fisher said that Cyprus’ banks are imperiling the Mediterranean nation, demonstrating the danger of overly- dominant financial institutions.
“Cyprus is a great example, once again, as we saw in Iceland, of banks that jeopardize their whole country,” Fisher said. “We just can’t let that happen.”
Fisher said Cyprus faces a different situation from the United States because it is contending with issues such as Russian crime. Still, it could serve as a lesson, according to the Dallas Fed chief.
“The reason I mentioned Cyprus is only because again, you have an economy that’s held hostage to bank failure and institutions that are too big to fail,” he said. “We can’t let that happen here in the United States, ever again.”
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