Fed’s Fisher Says Asset Buying Benefits and Costs Unclear

Federal Reserve Bank of Dallas President Richard Fisher said that both the ultimate benefits and costs of the central bank’s asset purchases are unclear.

“Companies are starting to use the copious cheap money they have access to for investing in capital projects and employing increasing amounts of workers,” Fisher said in a speech today in El Paso, Texas. “But it is not yet clear that we will achieve a justifiable bang for the trillions of bucks the Fed has flooded the economy with.”

Several Fed officials said the central bank should begin slowing the pace of its asset purchasing program later this year and halt it entirely by year’s end, according to minutes of the March 19-20 Federal Open Market Committee meeting released today. The Fed at that gathering affirmed its plan to keep buying $85 billion per month in mortgage bonds and Treasuries.

“The Federal Reserve has provided plenty of, if not too much, high-octane fuel in the form of cheap and abundant money to propel the economy forward,” Fisher said at the University of Texas at El Paso.

Speaking to reporters after his speech, the Dallas Fed chief said he would favor tapering the FOMC’s purchases of mortgage securities as early as the next meeting scheduled for April 30-May 1.

“You have to ask yourself, what’s the efficiency of continuing this process?” he said. “We have a robust housing market” and “we’re not going to have a $5 trillion balance sheet.”

Program Halt

The entire quantitative easing program should be halted by the end of this year, he said. Fisher added that the Fed’s third round of asset purchases has been less effective than its first.

Since U.S. central bankers met last month, a Labor Department report has shown that job growth sputtered to 88,000 in March from 268,000 in February. The Fed has said it will keep the quantitative easing program in place until the labor market substantially improves.

Fisher, who doesn’t vote on the FOMC this year, has been among the most vocal critics of additional monetary easing within the Fed.

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