Blog U.S. rate hikes: the sooner the better, says Fed’s Fisher

U.S. rate hikes: the sooner the better, says Fed’s Fisher
For some time, Federal Reserve Bank of Dallas president Richard Fisher has argued that U.S. inflation risks were growing, and that official interest rates would need to rise from their extraordinarily low levels.

Supported by the Fed’s quantitative easing (QE) stimulus program and historically low official interest rates, the U.S. economy has steadily, if slowly, rebounded from the recession of 2008-2009, and U.S. equity markets have advanced to record highs. 

In his final speech before his planned retirement from the Fed, Fisher showed his anti-inflationary stance hadn’t softened, urging “prompt” policy actions to temper the economic growth that is already in the pipeline. Most market watchers expect the Fed will begin raising interest rates from near zero – where they have been since 2008 – sometime this summer.

Investors will get a chance to hear more from Fisher – one of the most astute monetary policy experts in the world – on March 25 during the AIC.

As one of the Fed’s more aggressive anti-inflation hawks, Fisher has consistently urged his colleagues to throttle back monetary stimulus before U.S. employment and economic growth reach levels that could push inflation above the Fed’s 2 percent long-term target.

U.S. inflation remains subdued – below 2 percent for now. But at its current growth rate, the U.S. economy could see unemployment fall toward 4.5 percent in 2015, which could put upward pressure on inflation, in the hawkish view. The sharp decline in energy costs that began in 2014 provided an unexpected check on inflation. But the potential for a rebound in energy prices creates additional latent price pressures.