Dallas Fed Favoring Reduced Asset Purchases on U.S. Recovery

Dallas Fed President Richard Fisher said he’d like the U.S. to reduce its mortgage-backed security purchases program amid signs that the economy will probably grow at about 3 percent by the end of the year.

“I’m personally in favor of tapering back our mortgage-backed security purchases,” Fisher told reporters today at a conference in Abu Dhabi. “I think we’ve assisted the recovery of the housing market. We have a pretty robust housing situation right now. We don’t want to slip backwards.”

Chairman Ben S. Bernanke and his colleagues on the Federal Open Market Committee last week pledged to press on with $85 billion in monthly bond buying even as some Fed officials called for scaling back the record stimulus. The FOMC will continue buying until the labor market improves “substantially.”

The FOMC plans to continue buying $40 billion of mortgage-backed securities and $45 billion of Treasuries each month, which has expanded the central bank’s balance sheet to a record $3.21 trillion. The policy-setting panel said it will keep the main interest rate near zero as long as unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.

Dial Back

“Do we continue at this pace or do we dial it back?” Fisher said. “One of the developments that has occurred has been a more rapid snap back in housing prices. I think we can easily taper back without doing damage to the market place.”

The world’s largest economy grew at a 0.1 percent annual rate in the fourth quarter, up from a previously estimated 0.1 percent drop, the Commerce Department said last month. Growth will be 1.9 percent this year, according to the median of 81 economist estimates in a March 8-13 Bloomberg survey.

Residential real estate prices increased in January by the most since June 6. The S&P/Case-Shiller index of property values in 20 cities climbed 8.1 percent in January from the same month in 2012 after rising 6.8 percent in the year ended in December, the group said today in New York. The increase exceeded the 7.9 percent median forecast by economists in a Bloomberg survey.

Orders for U.S. durable goods climbed more than forecast in February, propelled by automobiles and a rebound in commercial aircraft. Bookings climbed 5.7 percent, the most since September.

‘Good Numbers’

“We’ve seen some pretty good numbers on employment, we’ve seen some pretty numbers on retail sales,” Fisher said. “We’ve seen some pretty good durable goods numbers. There seems to be a more positive tone.”

Fisher, who doesn’t vote on monetary policy this year, said the growth is coming from Texas and other areas in the middle of the country as New York and California lose population.

Bernanke and Federal Reserve Bank of New York President William Dudley yesterday defended their policy of keeping the benchmark lending rate near zero. Thirteen of 19 FOMC participants estimated at last week’s meeting that the first increase in the federal funds rate will be in 2015.

Fisher, 64, has been president of the Dallas Fed since 2005. His district includes Texas, northern Louisiana and southern New Mexico.