(Updates with closing markets in eighth paragraph.)
Oct. 12 (Bloomberg) -- Federal Reserve Bank of Dallas President Richard Fisher said that while too many Americans remain unable to find jobs, central bankers have done as much as possible to shore up the labor market without sparking inflation.
“There are limits to what a central bank can do,” Fisher said during a speech today in Abilene, Texas. “We can provide fuel, but we cannot provide incentives for those who create jobs” to “step on the gas pedal.”
The U.S. is struggling with stubborn unemployment even as the central bank “may have overfilled the tank” by providing too much liquidity to the economy, the Dallas Fed chief said. The jobless rate held at 9.1 percent in September even as American employers added 103,000 jobs and payroll figures for the prior two months were revised higher.
“The issue our economy is plagued with is unemployment,” Fisher said at a community forum sponsored by the bank and held at Abilene Christian University. “Too many people are out of work.”
Minutes of the Fed’s most recent meeting last month showed some policy makers wanted to keep additional asset purchases as an option to boost the economy, and that officials saw “considerable uncertainty” that U.S. growth will pick up.
The Sept. 20-21 debate culminated in the Federal Open Market Committee’s decision to replace $400 billion of Treasuries in the central bank’s portfolio with longer-term debt to reduce borrowing costs. Fisher, 62, dissented against the move, saying he did not prefer further easing.
The so-called Operation Twist is not an “effective way” to deal with the economy right now and fiscal authorities, not the central bank, “are the problem,” Fisher said in response to audience questions after his speech. He called lawmakers’ attitude toward U.S. fiscal issues “disgraceful,” and said further monetary accommodation would only encourage Congress to do less.
Stocks surged, briefly erasing the Dow Jones Industrial Average’s 2011 loss, as European leaders provided a road map of plans to tame the debt crisis and the Fed released its minutes. The Dow rose 0.9 percent to 11,518.85 at the 4 p.m. close in New York.
Philadelphia Fed President Charles Plosser today echoed Fisher’s views on Operation Twist by saying the move won’t have a “major impact” on the speed of the economic recovery.
Plosser on Economy
“The U.S. economic recovery will continue and gradually strengthen over time,” Plosser said in the text of remarks given in Philadelphia. “Although the downside risks around this forecast are apparent, I do not believe we are on the verge of a double-dip recession.”
Fisher has been president of the Dallas Fed since 2005. As a voting member of the FOMC in 2008, he dissented five times in favor of tighter policy. This year, he challenged the committee’s Aug. 9 pledge to keep the benchmark U.S. interest rate low through at least mid-2013, preferring instead to maintain a previous commitment to do so for “an extended period.”
--Editors: Vince Golle, Kevin Costelloe
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