Fed’s Fisher Says No Need to Extend Operation Twist

4-Traders.com, November 27, 2012. Copyright © 2012 Surperformance. All Rights Reserved.
 

 

BERLIN—The U.S. Federal Reserve should end its program aimed at lowering long-term interest rates, known as Operation Twist, next month, U.S. Federal Reserve Bank of Dallas President Richard Fisher said Tuesday.
 

Under the program, the Fed buys long-term Treasury bonds and sells short-term ones. Operation Twist is due to expire at the end of the year and Mr. Fisher, who has been skeptical of the program from its beginning, said he doesn’t want it extended.
 

“I question its efficacy,” he told reporters after a speech.
 

Mr. Fisher, who is considered one of the Fed’s most strident anti-inflation hawks, also said he doesn’t feel the Fed needs to continue purchasing mortgage-backed securities. In September, the Fed announced it would buy $40 billion per month of mortgage-backed securities until the U.S. employment market improves.
 

“My personal view is we don’t need to do more,” Mr. Fisher said.
 

He also said the Fed should define the limits of monetary policy. One option, he said, is to have a target for unemployment. At the same time, the Fed should set limits on the size of its balance sheet, he added.
 

During his speech, the veteran U.S. central-bank official said the Federal Reserve needs to think about how to harness monetary policy to spur businesses to put Americans back to work.
 

Speaking at a conference organized by the Levy Economics Institute, Mr. Fisher said the central bank now has a duty not only to maintain price stability and maximize employment, but also to preserve financial stability. He also said he supports a free trade agreement with Europe, which he said would be “stimulative” and would strengthen ties.