Fisher warns low interest rates stunt borrowing, business expansion
The Federal Open Market Committee's commitment to keep interest rates near zero through 2013 may cause small- and medium-sized businesses to delay borrowing, expanding and hiring, according to one regional Federal Reserve chief. Richard Fisher, president of the Federal Reserve Bank of Dallas, believes low rates will "give job-creating companies, particularly small- and medium-sized businesses, an incentive to delay borrowing for expansion, given that they feel stymied both by anemic demand and discomfort with how they are taxed and regulated." He warned that when frightened, people look for a quick fix, and added "my colleagues and I are professionally beholden to beware of short-term fixes that might contradict, or place in jeopardy the long-term duty and credibility of the central bank." Fisher, who argued against further quantitative easing as a way to jump start the economy and dissented against the latest FOMC policy decision, said the central bank has "done a great deal to reverse the situation that we confronted in 2008 and 2009." "As I have said repeatedly, we have filled the gas tanks of the economy with affordable liquidity," he said. "What is needed now is for employers to confidently step on the pedal and engage the transmission that will use that gas to move the great job-creating machine of America forward." Fisher ended his speech at the National Association of Business Economics annual meeting by discussing which economic policy decisions he favors. "If I believe further accommodation or some jujitsu with the yield curve will do the trick and ignite sustainable aggregate demand, I will support it," he said. "But the bar for such action remains very high for me until the fiscal authorities do their job, just as we have done ours. And if they do, further monetary accommodation may not even be necessary." "With that, I’ll stop. And in the best tradition of central banking, I’d be happy to avoid answering any questions you might have," he quipped. Write to: Kerri Panchuk.