US Federal Reserve Vice Chairman Stanley Fischer on Friday repeated the plea for more fiscal policy stimulus to the US economy — something US president-elect Donald Trump has promised to deliver.
In the first public comments by a senior Fed official since Trump’s surprise victory in Tuesday’s election, Fischer said he and many central bankers have stressed that “it would be useful to have a more expansionary fiscal policy.”
Stimulus that boosts the economy will “ease the task of monetary policy,” he said in response to questions at a central bank conference in Santiago, Chile, speaking via a video link.
With US interest rates close to zero, the Fed does not have much room to maneuver should the US economy again need help.
Fed officials have bemoaned the lack of fiscal policy support for some time, saying there has been too much reliance on monetary policy alone to boost growth.
There is “more than one policy tool. There is fiscal policy and in this particular instance it could be used for quite a few reasons. We’ll have to see what happens,” Fischer said.
Trump, who has slammed the Fed, also has promised to boost economic growth and create jobs through an infrastructure program.
US President Barack Obama proposed just such a program, but could not win congressional support.
With a Republican-controlled US House of Representatives and Senate, Trump might get it.
Still, economists caution that large-scale building projects take a long time to implement and to see the economic benefits.
Asked about market movements since Trump’s shock election win, Fischer declined to comment directly, but said: “Of course we will watch events and, depending on how the markets turn out and how the economy turns out, we will adjust our policy as necessary.”
In his speech, Fischer also said the Fed expects the US economy to continue to recover and that there is a “quite strong” case to raise interest rates gradually, although they will remain relatively low.
“US policy rates are likely to increase more slowly, and by a lower cumulative amount, than in past episodes of US monetary tightening,” he said.
Most analysts expect the Fed to raise interest rates at next month’s policy meeting, which would be the first hike in a year.
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