Dallas Federal Reserve Bank President Richard Fisher said Thursday that in his view the Federal Reserve should mull refining its communication on future changes of its key overnight interest rates.
Speaking at the Bundesbank Symposium on Financial Stability in Frankfurt Fisher also said that a more aggressive drawdown of bond buys may cause market jitters and that any argument for a more aggressive tapering would currently not win support.
“Speaking for myself, I think we still have a great deal of further refinement for our expression of lift-off, of when we might deal with the overnight rate,” Fisher told reporters on the sidelines of the conference.
“We have picked a number, it is a very crude number,” Fisher said referring to 6.5% unemployment target. “I am in favour of discussing this further and further refining that in order explain to markets what would condition our behaviour.”
Asked whether such a refinement may include a reference to other data sets, Fisher said that this may be a possibility. “What I know is that structural unemployment is a function of of fiscal policy.
Fisher reminded that he had opposed quantitative easing in the first place when asked whether he would supported a more aggressive tapering. However, he conceded that a sharper reduction in bond buys risks unsettling markets. “Even if I did, I would not win the argument.”
Fisher cautioned that junk bond yields have gone “down to much” noting that they are one indicator as to whether monetary policy is too loose.
Fisher asserted that monetary policy in the US has “done enough” and while the Eurozone is at a “different stage on monetary policy”, stressed that “monetary policy cannot carry the load by itself.”
“Europe’s problems are not dissimilar from ours in one key aspect and that is you need fiscal restructuring and fiscal reform,” Fisher said.
“There is slight uptick in activity, it is very faint but it is positive here in Europe. As I like to day in the Unites States, the sign is in the right direction,” Fisher said. “We would like to see a greater quantity on that sign.”