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Fisher Says Fed Not at Fault of Using Every Easing Tool

Sept. 28 (Bloomberg) -- Federal Reserve Bank of Dallas President Richard Fisher said the U.S. central bank shouldn’t be faulted for using every tool available to bolster growth, even if monetary policy on its own can’t revive the job market.

“I don’t think anybody could fault the chairman or the FOMC for using every tool at its disposal to get the economy up and running again,” Fisher said to reporters today after a speech in Dallas, referring to the policy-setting Federal Open Market Committee and Fed Chairman Ben S. Bernanke.

The FOMC announced a third round of quantitative easing this month, saying it will buy $40 billion of mortgage bonds every month until the employment outlook improves. Policy makers have a duty to keep prices stable as well as to achieve maximum employment, and the Fed shouldn’t let inflation rise to support the labor market, Fisher said.

“We’re necessary, but not sufficient for achieving full employment,” which is “a function of fiscal policy,” Fisher said after speaking at the University of Texas at Dallas.

Concluding a two-day meeting on Sept. 13, the FOMC also said it will probably keep its benchmark interest rate low through at least mid-2015, compared with an earlier expectation of late 2014. The central bank still has more easing tools, including additional asset purchases and changing the way it communicates its policy outlook to the public, Chairman Ben S. Bernanke said Sept. 13.

Fragile Recovery

Data since the FOMC meeting have underscored the fragility of the U.S. recovery. Consumer spending barely rose in August after adjusting for inflation, according to Commerce Department figures releases today. Business activity unexpectedly contracted in September for the first time in three years, a separate report from the Institute for Supply Management-Chicago Inc. showed.

Stocks fell as the reports signaled the U.S. economy may be losing momentum. The Standard & Poor’s 500 Index dropped 0.5 percent to 1,439.54 at 3:42 p.m. in New York.

Inflation isn’t a short-term risk, the Dallas Fed chief said today. Still, “it would be a dangerous thing if we were to abandon containing inflation and inflation expectations in order to achieve employment targets.”

Fisher, who doesn’t vote on policy this year, dissented twice last year against moves to push down long-term borrowing costs and to keep the benchmark interest rate near zero until at least mid-2013.

To contact the reporter on this story: Aki Ito in San Francisco at aito16@bloomberg.net Thomas Black in Dallas at tblack@bloomberg.net

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

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