Fed`s Fisher sees near-term strength for economy
California: Dallas Federal Reserve Bank President Richard Fisher on Thursday said the United States should have a "good snap-back" from recession in the final months of 2009, but that future growth could be a "slow crawl."
"You could have a stout third-quarter (GDP) number," Fisher told reporters after a speech at the University of California in Santa Barbara.
"It`s encouraging and helpful and hopeful that we have a good third quarter and fourth quarter. But what is the rate of growth after that? And how do we get back to creating jobs?"
Fisher said it was too early to guess at the timing or pace of interest rate moves once the Fed starts to reverse its extremely easy monetary policy -- one that has left benchmark rates near zero since December 2008.
"You have to feel it. You have to walk through a river feeling the stones underneath your feet," he said. "We have to be forceful, or we may have to be gradual. It depends on the circumstances."
Still, with price pressures tilted more toward deflation because of high unemployment and low capacity utilization in the United States economy, inflation should not be a problem for now, Fisher said.
No big inflation risk
The Fed is prepared to pull the trigger on a policy shift when the time is right, he added.
"If we conduct ourselves properly, I don`t think that inflation becomes a significant risk."
Many Fed watchers expect no move in interest rates from the US central bank until 2011, although derivatives traders are betting a rate hike to come in the first half of 2010.
Overall, the Fed`s Eleventh District president gave a downbeat assessment, worrying about the sustainability of growth in the medium term.
"The gears are very slow in their rotation, but you might say they`re beginning to mesh," said Fisher, who is not a voting member of the Federal Open Market Committee in 2009.
In general, the United States economy is shaping up to be less of a consumption-driven and more of a savings-driven society than has been common in recent decades, he said.
At the tail end of a painful recession, businesses lack pricing power, a condition that caused prices for almost half the items in a commonly used US inflation "basket" to fall in July, Fisher noted.
Revenue growth at companies has "evaporated," and to preserve profits firms "will continue to focus on cost control, most painfully by shedding workers and driving those who remain on the payroll to higher levels of productivity."
Responding to a question from an audience member at the UCSB campus, which is perched on the Pacific shore, Fisher said he was "praying" that the US jobless rate did not hit 10 percent, but saw no guarantee his prayers would be answered.
August US unemployment, due for release on Friday, is forecast at 9.5 percent against 9.4 percent in July.
More from India
More from World
More from Sports
More from Entertaiment
- Siachen miracle: Lance Naik Koppad's wife terms her husband's 'news of being alive' as 'rebirth for family'
- Drunk girl creates ruckus in Delhi's Connaught Place; arrested - Watch
- Preity Zinta to tie the knot this Valentine?
- JNU erupts over 'Shaheed Afzal Guru', 'Azad Kashmir'; rival student groups clash, police deployed
- WATCH: 'Sting videos of Kejriwal govt's minister Imran Hussain's staffer demanding bribe of Rs 25 lakh for his boss'