RTTNews - The efforts of the Federal Reserve to restore stability to financial markets are showing signs of success, Dallas Federal Reserve Bank Branch President Richard Fisher said Friday, although positive growth will not likely resume until 2010.
In a speech before the Texas Bankers Association, Fisher said that Fed actions have succeeded in pulling the financial markets and the economy from the edge of the abyss.
Still, Fisher predicted positive growth will not resume until the beginning of 2010, adding that he would be surprised if the economy sees a positive GDP number before then.
Challenges that remain include a still cautious consumer population and still underwhelming global demand. Concerning factor like those threatens to temper the recover, Fisher said, adding that he envisions a slow recovery.
The economy is in for not a V-shaped snapback-nor even a U-shaped one-but a very slow slog as we find a more sensible and sustainable mix between consumption and savings and investment, he warned in prepared remarks.
In addition, Fisher warned that unemployment will likely exceed 10 percent before reversing course.
A portion Fisher's remarks were cautiously optimistic, referencing the green shoots that have sprouted and will help to set the stage for a full recovery. He was full of praise for his colleagues at the Federal Reserve, noting the bevy of lending institutions established and the out of the box thinking that he believe prevented us from falling into the chasm of an economic depression.
Specifically, he noted a decline in interest rates for mortgages and the LIBOR market, a resumption of private bond market issuance, and an improvement in stock market performance, with the major indices having risen off their lows.
Fisher told the Texas bankers in prepared remarks that he sees signs of improvement on Main Street as well as Wall Street. He noted slowing job losses, a pickup in sales for trucking companies, and a mild improvement in retail sales.
These are encouraging signs, Fisher said. But we are not out of the woods. We have miles to go before we sleep.
In terms of price stability Fisher, a well-known inflation hawk, said that the Fed appears to have beaten back deflationary concerns. Still, unwinding the Fed's balance sheet at an appropriate time is a tricky prospect, he said, but one that the FOMC has been examining extensively.
Indeed, as I speak, we are studying ways to unwind our balance sheet in a timely way, he said, referencing Fed Chairman Ben Bernanke's remarks at the Fed conference in Jekyll Island, Georgia earlier in the week.
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