Federal Reserve Bank of Dallas President Richard Fisher said U.S. gross domestic product growth may be “gradually picking up” to 3 percent while inflation probably will remain below 2 percent.
“We could have GDP growth of 3 percent this year,” Fisher said today in an interview on Bloomberg Radio’s “A Closer Look with Arthur Levitt.” He said “a lot of guesswork is involved no matter how you cut it” because inventory and management techniques “have changed radically. It’s very hard for our models to catch some of these complexities.”
Fisher, who is not a voting member of the Federal Open Market Committee this year, has been one of the most outspoken critics within the Fed of additional monetary easing by the central bank. He said today that the potential costs of asset purchases aimed at spurring economic growth have begun to outweigh the benefits as the Fed’s balance sheet approaches $3 trillion.
“The benefits, I think, get less and less as we do more, and the cost potential rises,” Fisher said. “I have not been supportive of these recent rounds of QE because I think we’re pushing on a string.”
Interest rates have remained low because of the Fed’s unprecedented asset purchases and because investors are seeking safety in U.S. government debt and avoiding European nations.
“Obviously we have suppressed rates to a degree, the other thing that has helped to suppress rates is the troubles elsewhere,” Fisher said. “Europe is much uglier than we are, and we’ve seen enormous inflows into the United States.”
The Dallas reserve bank’s trimmed mean annual inflation rate index probably will increase by about 2 percent over the next year, in line with the Fed’s inflation target, he said. The gauge fell to an 18-month low of 1.6 percent in November.
Fisher, 63, will be a voting member of the policy making FOMC in 2014. He dissented twice in 2011 against moves to push down long-term borrowing costs and to keep the benchmark interest rate near zero for a prolonged period. He voted five times in 2008 in favor of tighter policy.
The Dallas Fed chief has been president of the reserve bank since 2005. The district includes Texas, northern Louisiana and southern New Mexico.
Fisher previously was an assistant to Treasury Secretary W. Michael Blumenthal in the Carter administration and deputy U.S. trade representative in the Clinton administration with the rank of ambassador from 1997 to 2001.
The next FOMC gathering is scheduled for Jan. 29-30 in Washington.