Fed's Fisher: We Won't Get Positive Growth Until 2010
The U.S. economy will have negative growth for 2009 before it improves slowly in 2010, Dallas Federal Reserve Bank President Richard Fisher told CNBC Wednesday.
"Obviously we're under duress right now. I expect a gradual lifting of performance, getting less bad as we go through the year, but still I expect negative growth for this year, and improvement for the subsequent year," he said.
"I think that the first quarter of 2009 was equally bad or maybe slightly worse than the fourth quarter of 2008," Fisher also said.
"There's little confidence in the economy right now," said Fisher. "We won't get into positive growth until 2010."
Fisher also said that the U.S. was ahead of the curve in addressing its economic woes and that he was "fully supportive of the unorthodox tools the Fed has used to used to help the economy."
The global nature of the current downturn has prevented some of the vast U.S. monetary and fiscal stimulus from taking hold so far, Fisher said.
"We've certainly been ahead of the curve, and you see other central banks now follow us.
But the global economic situation has imploded ... I think there's an overall bad mood in terms of the world at large," he said. "There's an enormous amount of stimulus in the economy, but there's just deep concern. There's a lot of fog out there, and they don't know if it leads into a box canyon or to a new bridge in the sunlight. And time will tell."
Fisher is not a voter on the Federal Open Market Committee in 2009, but dissented against FOMC decisions four times in 2008 to make a stand against inflation, which was rising rapidly at the time.
In hindsight, given the subsequent collapse in price pressures, those decisions were not mistakes, Fisher said. He added that he has been fully supportive of the Fed's unorthodox tools to assist with credit market functioning.
A "regeneration of activity" may be under way in the U.S. housing market, helped by a drop in mortgage interest rates on the back of the Fed's purchases of mortgage-backed securities, he said.
Fisher said financial markets reacted well to the Fed's announcement that it will buy up to $300 billion in U.S. longer-term Treasury debt, and to the first purchases under that program.
Still, the Fed must be careful not to be perceived as "monetizing fiscal largess" Fisher added. "The point is, not to support the embers of inflation going forward, either because of perceptions or because of reality."
Asked about growing calls for protectionism by some in the U.S., Fisher said, "It's the crack cocaine of economies. I understand the need to protect your own, but it should be avoided."
Fisher also said that he didn't expect much in the way of policy to come out of the G20 meeting in London this week. "It's a meet and greet," said Fisher. "It's pretty much gong to what type of mood leaders leave with than what they actually accomplish."