Only a dire situation would call for the Federal Reserve to buy more assets, and that is unlikely given the better-looking economic data, a top central bank official said on Monday.
Dallas Fed President Richard Fisher, an outspoken policy hawk, added that he was perplexed by Wall Street's continued preoccupation with the possibility that the Fed will engage in a third round of large-scale asset purchases, known as quantitative easing, or QE3.
I believe adding to the accommodative doses we have applied rather than beginning to wean the patient might be the equivalent of medical malpractice, he said at a meeting of the Dallas Regional Chamber.
It is my opinion that we should run that risk only in the most dire of circumstances, and I presently do not see those circumstances.
Fed policymakers are set hold a regular meeting March 13 to decide what more, if anything, to do about the recovery that has shown signs of gaining traction this year, including a drop in the jobless rate to 8.3 percent and improvements in measures of consumer spending and confidence.
At its January policy meeting the Fed gave a gloomy read on the world's largest economy, saying it expected to keep interest rates exceptionally low at least through late 2014 and setting off intense debate over the need for more steps to boost slow U.S. growth.
On balance, the data indicate improving growth and prospects for job creation in 2012, said Fisher, who does not have a vote on the central bank's policy-setting committee this year.
He added, however, that the Fed's mandate of stable prices is being challenged by higher gasoline prices.
(I)f the data continue to improve, however gradually, the markets should begin preparing themselves for the good Dr. Fed to wean them from their dependency rather than administer further dosage, Fisher said, using a familiar metaphor.
In late 2008, the U.S. central bank slashed interest rates to near zero and has since bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades.
The two rounds of purchases were known as QE1 and QE2.
(Reporting by Bruce Nichols; Writing by Jonathan Spicer; Editing by Chizu Nomiyama)