Richard Fisher, the President of The Federal Reserve Bank of Dallas, says that Fed’s quantitative easing program must not interfere with financial markets. The banker made the comments in Dallas today, and they were picked up by Bloomberg. Fisher is one of the voices arguing for an end to the central bank’s bond buying program.
The Federal Reserve pledged last year to keep buying assets at a high rate in order to spur recovery in the U.S. economy. Fisher has been a vocal critic of the policy, saying, “I was against QE3, I don’t believe it had any efficacy,” in response to questions about the program’s effect on the labor market.
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Fisher against tapering
The Federal Reserve will hold its next Open Market Committee meeting on September 17th and 18th. The market has pushed up the yield on U.S. Treasuries in expectation of tapering of the Federal Reserve’s quantitative easing program. The yield on the 10-year Treasury note rose to 2.99 percent on today’s market, a two year high for the instrument.
Richard Fisher has been one of the voices arguing for an end to the program. He is clear on his distaste for the program. In his view, the key point is whether the massive asset purchases are good for preserving financial stability. The program has been part of the impetus for the impressive rise in the stock market this year.
Since January 1, the S&P 500 (INDEXSP:.INX) has risen by more than 16 percent. The key index of the stock market has slowed considerably since talk of the Federal Reserve taking its foot off the pedal erupted. The index has risen by close to 3 percent in the last three months, but has fallen more than 2 percent in the past thirty days.
QE program effects on financial stability
There is no question that the QE program is having significant effects on the financial markets. The kind of effect that closing off the program will have is difficult to predict, however. “Now the question is, how do we put it to an end? This doesn’t go on forever,” Fisher said today, referring to the program.
The Fed has said that it will taper the program in order to slowly ease the economy and financial markets off of the massive asset buys. The Chairman of the bank Ben Bernanke has, however, said that the central bank reserves the option of increasing asset purchases if the U.S. economy responds too negatively.