Sun, Feb 16, 2014 page13

• Fisher backs tapering, despite weather

  NOT ‘FRIGHTENED’: The Dallas Fed president said that weaker-than-expected data last week was due to the severe weather, and that the economy was picking up

  • Bloomberg
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  US Federal Reserve Bank of Dallas President Richard Fisher said the central bank should stick to its strategy of gradually reducing bond purchases even as harsh winter weather slows US economic growth.

  “I am not persuaded continuing to taper should be altered,” Fisher yesterday said in a Bloomberg Radio interview in Dallas with Kathleen Hays and Vonnie Quinn. “Obviously, weather is playing a significant role here.”

  “If you look at activity in the west and the southwest and Florida, you are seeing pretty robust activity,” said Fisher, who votes on policy this year. “Even the Fed cannot offset Mother Nature. The economy has been moving in the right direction.”

  

  Adrienne Sipe, left, and Brooke Gilliam leap off a snow podium they made near the US Capitol in Washington on Thursday.

  Photo: Reuters

  Fed Chair Janet Yellen pledged this week to maintain her predecessor’s policies by trimming stimulus in “measured steps,” and signaled the bar is high for a change in that plan.

  Only a “notable change in the outlook” for the economy would prompt policymakers to alter the pace for tapering the Fed’s US$65 billion in monthly bond buying, Yellen said during congressional testimony.

  Fisher said he will favor trims in bond buying at each Federal Open Market Committee meeting unless he sees “something truly frightening in the economy.”

  US industrial output unexpectedly declined last month by the most since May 2009, adding to evidence severe weather weighed on the economy. The 0.8 percent decrease at manufacturers followed a revised 0.3 percent gain the prior month that was weaker than initially reported, figures from the Fed showed yesterday.

  Sales at US retailers fell last month by the most since June 2012. The 0.4 percent decrease followed a revised 0.1 percent drop in December last year that was previously reported as an increase, according to Commerce Department figures released on Friday.

  The disappointing data on manufacturing and retail sales followed two straight employment reports that fell short of economists’ forecasts. Payrolls grew by 113,000 last month and by 75,000 in December last year, the weakest back-to-back gains in three years.

  Fisher said Fed officials should discuss changing their forward guidance on the possible timing for increasing the benchmark interest rate.

  “We need further discussion about how we refine that language,” he said.

  St Louis Fed President James Bullard last week said the central bank will probably signal the path for interest rates based on “qualitative” judgments of the economy, moving away from a pledge to begin considering an increase in the main interest rate when unemployment falls below 6.5 percent.

  The 6.5 percent threshold is a “crude instrument,” Fisher said.

  The jobless rate unexpectedly declined last month to 6.6 percent, according to a US Department of Labor report.

  Some job markets may be tightening with “severe labor shortages in certain areas,” including construction workers, technology workers and auditors, Fisher said. “We are hearing reports, at least in my district, of some labor price pressures.”
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