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Fed’s Fisher Says Europe Drives U.S. Interest Rates Down

Richard Fisher, president and chief executive officer of the Federal Reserve Bank of Dallas. Photographer: Peter Foley/Bloomberg
Richard Fisher, president and chief executive officer of the Federal Reserve Bank of Dallas. Photographer: Peter Foley/Bloomberg

May 30 (Bloomberg) -- Federal Reserve Bank of Dallas President Richard Fisher said Europe’s debt crisis has done more to lower U.S. interest rates than the Fed’s maturity-extension program, known as Operation Twist.

“We are the beneficiary” of Europe’s crisis because it makes the U.S. look “relatively handsome,” Fisher said in response to a question from the audience after a speech in San Antonio, Texas, today. “That’s one of the reasons interest rates are so low.”

The Fed announced in September it would replace $400 billion of short-term debt with longer-term securities, a program intended to lower borrowing costs and in turn support the recovery. The yield on 10-year Treasury notes dropped to a record low today as investors grew concerned over the deepening crisis in Europe.

“I don’t know what we would gain” from further policy easing, given that borrowing costs already are so low, Fisher told reporters after the speech. “Liquidity is not the issue.”

Fed policy makers last month repeated their pledge to keep interest rates low through at least late 2014, citing a still-elevated level of unemployment.

“Right now, we are in accommodative mode” because economic growth is “just above stall speed,” Fisher said.

Pending Home Sales

Stocks fell and Treasuries rose today as Spain struggled to recapitalize its banks and concern grew about Greece’s future in the euro. The Standard & Poor’s 500 Index fell 1.3 percent to 1,315.72 as of 3:30 p.m. in New York. The yield on 10-year Treasury notes fell to a record of as low as 1.6170 percent today.

Recent economic reports have underscored the Fed’s depiction of an economy that’s growing “moderately.”

Pending home resales dropped 5.5 percent in April, according to figures released today by the National Association of Realtors. A May 16 Fed report showed that industrial production increased 1.1 percent in April, the most since December 2010.

Several Fed officials said they would favor more stimulus should the recovery falter or downside risks “became great enough,” minutes of the April 24-25 meeting showed. The Dallas Fed chief has repeatedly voiced his opposition to more easing, arguing that there’s little more the central bank can do.

Fisher, 63, isn’t a voting member of the policy-setting Federal Open Market Committee this year. He dissented last year twice 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.

To contact the reporter on this story: Aki Ito in San Antonio at

To contact the editor responsible for this story: Chris Wellisz at

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