Fed Fisher: Main Problem in U.S. Is Unemployment, Not Inflation

BERLIN (MNI) – Dallas Federal Reserve Bank President Richard Fisher said Tuesday that the main problem in the U.S. economy at the moment is unemployment, not inflation.

“I believe inflation is under control in the United States,” Fisher said at a conference of the Levy Economics Institute here. “Our real problem is underemployment,” he said.

Fisher said he currently saw “no evidence” of inflation risks. “I do not believe inflation need be the inevitable consequence of the Federal Reserve expanding its balance sheet,” he added.

At the same time he cautioned that “we must be ever mindful…that a shift [in inflation expectations] comes quickly and suddenly.”

Fisher said the Fed must define what the limits of its policies are. “We’re going to need to soon decide and signal to the market when the punchbowl will be ended and then will be withdrawn,” he said.

“Monetary policy is necessary but not sufficient” to get the U.S. economy on track again, Fisher argued. “Now we need the fiscal side to do its job,” he said.

Currently, worries about the so-called “fiscal cliff” in the U.S., as well as concerns about the Chinese and European economy, are holding back investments in the economy, he said