It is important to note that Fisher has been the only lone hawk in a nest of doves. He has been the only one voicing against QE3 earlier in the year, and that didn’t sway the Fed one bit. Nonetheless, Bernanke has also mentioned that he would rather not see the Cliff comes into fruition, and certainly there is a limit on what the Fed can do, especially right now when market is already hoping/anticipating an expansion of current $40B monthly QE ‘Infinity’.
In the event the US goes off the Fiscal Cliff, don’t expect the Fed to shield markets from the worst.
In a live interview on The Kudlow Report, the hawkish Dallas Fed President Richard Fisher said he’d resist that kind of intervention.
“I do not see us as that kind safety net,” he said. “There’s got to be a limit. In committee we’d have to decide what kind of limit, but there’s got to be a limit.”
That means if Congress play partisan politics and a big tax hike kicks in, the first quarter turns negative and lawmakers are still scurrying around Washington, unable to reach a deal – don’t expect a massive bond buying program, explained Larry Kudlow.
Fisher went on to say lawmakers have to step up – and if need be he thinks the Fed should force their hand.
“The more we do at the Fed, the more excuses politicians have to do nothing.”
And Fisher is tired of the indecision.
“Fiscal authorities must get their act together,” he said, “We can’t just rely on monetary policy – we can’t have a monetary policy of infinity and beyond.”
“The Fed has been carrying the ball,” Fisher added. “But we can’t carry the ball all by ourselves.”
Via – CNBC
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