The Federal Reserve should start to trim its massive bond-buying program next week, and spell out a clear path for phasing it out altogether, a top Fed official said on Monday.
"It is time to taper,'' Dallas Federal Reserve Bank President Richard Fisher said in remarks prepared for delivery to the DTN/The Progressive Farmer AgSummit in Chicago.
The Fed next meets to decide policy Dec 17-18 and most economists expect it to defer any change until next year.
Saying that the cost of the Fed's $85-billion-a-month asset-purchase program "far exceeds" its benefits, Fisher urged reducing it "at the earliest opportunity," and to articulate a clear, well-defined path for ending it by a certain date.
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Doing so, he said, could make the Fed's change of policy course easier for markets to digest. At least three of his Fed colleagues have signed on to the same approach to ending the program, known as QE3 because it is the third round of quantitative easing.
When the Fed last signaled it was gearing up to end its bond-buying program, in May and June, investors pushed up market rates faster and farther than the Fed had expected. The rise in rates threatened to slow an already fragile recovery, and was one factor in the Fed's decision not to pull back on bond-buying at its September meeting.
"We should make clear that, barring some serious economic crisis, we will stay the course of reduction,'' Fisher said.
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