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Fed’s Fisher: Just Stop With the Easing

The Exchange

Richard Fisher, the president of the Federal Reserve Bank of Dallas, says it's time for policy makers to get out of the way, not to throw more money at the economy, directly countering the comments one of his central bank colleagues offered earlier this week.

"I believe we have done our job," he said during an interview on Bloomberg TV, reiterating a position he's expressed previously. "We have done enough. Just doing more doesn't solve the problem. The problem is engaging the transmission."

Fisher's remarks came a day after his counterpart in charge of the Boston Fed, Eric Rosengren, said the Fed has to buy bonds until the economy starts growing at a better clip and the unemployment rate comes down.

But Fisher, who's known for being more hawkish, that is, concerned about driving up inflation with too much monetary easing (see the below Daily Ticker video from May), says that's not the approach.

"We provided the gas," he said on Bloomberg TV. "The gas tank is full ... who's going to incent the driver of this economy to step on the accelerator and move it forward? [T]hat's the private sector."

The Fed's first quantitative easing program involved putting more than $1 trillion toward buying mortgage bonds, and three prominent moves since have committed to funneling roughly $1.3 trillion through the Treasury market. The U.S. central bank's second round of quantitative easing was worth $600 billion, and that preceded a $400 billion bond swap called Operation Twist. The Twist got new life in June, when the Fed said it would exchange a further $267 billion in short-term Treasuries for long-term issues.

Rosengren and Fisher's offsetting positions illustrate just how much very intelligent, well-informed people continue to differ in terms of healing the sluggish U.S. economy. Of course, as compared with the op-ed pages, this isn't merely academic. Here, we have two leaders of Fed branches, economics and finance experts who play a crucial role in the nation's financial position, with diametrical views. Central bankers certainly aren't going to always agree, but take this as further evidence that finding a solution to end the country's economic malaise isn't getting any less complex.

As is the case with Rosengren, Fisher's not currently a member of the Federal Open Market Committee, the Fed body that votes on monetary policy. Some of the seats on the FOMC are permanent, while others rotate each year. The Dallas Fed chief will be an alternate on the committee next year and a voting member in 2014.

The FOMC's next meeting is scheduled for Sept. 12-13.

Now let us know what you think. Is Fisher right, or is Rosengren?