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Fed bank chief wouldn’t back a new bond buy

Dallas Federal Reserve president Richard Fisher worries that money pumped into the economy could unleash inflation. Dallas Federal Reserve president Richard Fisher worries that money pumped into the economy could unleash inflation.
By Jeannine Aversa
Associated Press / February 9, 2011

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WASHINGTON — A Federal Reserve official said yesterday he would oppose going beyond the Fed’s $600 billion bond-buying program to boost the economy and would push to scale it back if inflation posed a threat.

Richard Fisher, president of the Federal Reserve Bank of Dallas and an outspoken skeptic of program, became a voting member on the Fed’s policymaking panel this year.

Fisher made the remarks hours after Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said policy makers should reconsider the bond-buying program now that the economy is strengthening. Lacker is not a voting member.

The growing criticism suggests Fed chairman Bernanke will face a difficult time if he chooses to launch a new bond-buying program when the current one ends in June.

“It is hard for me to envision a scenario where I would not use my voting position this year to formally dissent’’ should the Fed recommend embarking on another bond-buying program, Fisher said in a speech in Dallas. While he has criticized the program before, this was the clearest sign that he will oppose another round of stimulus.

Both men have reputations for being inflation hawks. They are more focused on the threat of inflation than on efforts to stimulate growth. Fisher worries that the billions of dollars pumped into the economy through the program could unleash inflation.

And, if higher prices for commodities, such as oil, were to lead to a broader inflation problem in the economy, Fisher said he would “be at the forefront of the effort to trim back our Treasury holdings’’ and scale back the current $600 billion program.

Lacker said more spending by consumers and businesses means the economy probably will grow at a faster pace of around 4 percent this year, compared with 2.9 percent last year.

Inflation should stay in check, he said in a speech in Newark, Del. But rising prices for commodities need to be closely watched, he added.

“The distinct improvement in the economic outlook since the program was initiated suggests taking that reevaluation quite seriously,’’ said Lacker.

The Fed at its March or April meeting likely will want to signal whether it will end the bond purchase program on schedule or extend it. Any push to renew the program would likely face stiffer resistance. Some Fed members, including Fisher and Lacker, might pressure Bernanke to scale the program back before June.

Bernanke will provide a fresh assessment of the economy today when he testifies before the House Budget Committee.