Don't inflate out of financial mess: Fed's Fisher
CHICAGO (Reuters) - Trying to solve the financial industry's structural problems with more interest rate cuts would only worsen the situation by raising inflation, Dallas Federal Reserve Bank President Richard Fisher said on Thursday.
"I have maintained a strong reluctance to further general monetary accommodation," Fisher said in prepared remarks to the Chicago Council on Global Affairs.
Fisher has dissented against the last two Federal Open Market Committee decisions to lower benchmark lending rates.
He has argued in recent speeches that lower rates will not boost economic activity until the "pipes" of the U.S. financial system are totally flushed out.
"The answer ... is not to compound the bad by repeating the oft-prescribed remedy of inflating our way out of our predicament with a wing-and-a-prayer promise that it can always be reined in later," Fisher said.
"I have been an advocate of using our various discount window facilities, within reason, to bridge the financial system's structural problems as the credit markets correct themselves," he said.
Fisher's remarks, made available in advance, focused on the importance of trade to the U.S. economy and the need to tone down protectionist rhetoric.
"To wrap ourselves in the toxic, defensive mantle of protectionism ... is akin to embracing inflation as a remedy to the credit market correction," he said.
The United States can benefit from growing economies such as China and India by pressing its advantage in exports of services from medical care to entertainment, Fisher said.
"We shifted our buying from goods to services as we grew richer ... there is no reason to believe that the next group of countries climbing the income ladder will behave any differently," he said.
(Editing by Neil Stempleman)
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