Fed’s Fisher Says Companies Voicing More Concern About Prices

Federal Reserve Bank of Dallas President Richard Fisher said the central bank’s $2.87 trillion in assets has provoked anxiety among businesses that inflation will accelerate.

“I’m just reporting what I hear on the street, which is a real concern that with our expanded balance sheet, we are just a little bit in an ember of what could become an inflationary fire,” Fisher said today in Norman, Oklahoma. Small businesses are especially worried “about cost-push pressures because they don’t have pricing power that they would like but they are feeling the squeeze on the cost-side.”

Crude oil prices have increased 2.2 percent this year and the personal consumption expenditures index rose 2.3 percent in the 12 months through February, above the Fed’s 2 percent goal. Today, oil fell to an eight-week low on forecasts U.S. supplies hit the highest level for this time of year since 1990. Crude oil for May delivery fell $1.44 to $101.02 a barrel on the New York Mercantile Exchange, the lowest settlement since Feb. 14.

The policy-setting Federal Open Market Committee last month voted to maintain its plan to keep interest rates low through at least late 2014 and called for additional stimulus only if the economy loses “momentum” or if inflation stays below its 2 percent target, minutes from the March 13 meeting showed. Data released since the last meeting have pointed to a mixed outlook for the U.S. economy, with manufacturing continuing to rebound while job growth slowed.

Pessimistic Estimate

U.S. employers added 120,000 jobs in March, the fewest in five months and less than the most pessimistic estimate in a Bloomberg News survey of economists, Labor Department figures showed April 6. The unemployment rate fell to 8.2 percent from 8.3 percent as people stopped looking for work, bolstering Fed Chairman Ben S. Bernanke’s view that the declining jobless rate overstates gains in the labor market.

Fisher said the jobs data hasn’t changed his outlook on the economy. It “just means I’m going to be a little more watchful but it’s an input,” he said, adding “you don’t make a decision based on one data point.”

Fisher, who doesn’t vote on monetary policy this year, reiterated his view that lower borrowing costs aren’t needed and that fiscal uncertainty is weighing on growth.

Many business leaders are saying, “please, no more liquidity,” Fisher said. “The cost of money” is “not the issue,” he said.

Fisher, 63, has called the notion of another round of quantitative easing a “fantasy.” He has been president of the Dallas Fed since 2005 and his district includes Texas, northern Louisiana and southern New Mexico.

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