Dallas Federal Reserve President Richard Fisher said there was no sign of a problem with U.S. inflation at the moment, and revealed that Chinese officials had quizzed him on the Fed's purchases of U.S. government bonds.
Fisher, who is not a voting member of the policy-setting Federal Open Market Committee (FOMC) in 2009, said research by his staff indicated that inflation was currently not a threat.
I don't think that's the risk right now, Fisher told the Wall Street Journal in an interview published on Monday. Price increases are less and less. Ex-energy, ex-food, ex-tobacco you've got some mild deflation here and no inflation in the (broader) headline index, he was quoted as saying.
Fisher, who is viewed as one of the Fed's more prominent inflation hardliners, however, highlighted the need to reverse eventually the United States' scheme to buy up billions of dollars' worth of debt to help the nation out of recession.
Policymakers have to be always mindful that whatever you put in, you are going to have to take out at some point. And also be mindful that there are these perceptions (about the possibility of monetizing the debt), which is why I have been sensitive about the issue of purchasing Treasuries, he said.
Treasury purchases were also a hot topic on a recent visit to China during talks with officials, Fisher revealed.
I was asked at every single meeting about our purchase of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States. That seems to be the issue people are most worried about, he said.
Fisher added that central bankers had to stand up to politicians calling for ever more financial stimulus.
Throughout history what the political class has done is they have turned to the central bank to print their way out of an unfunded liability, he warned.
We can't let that happen. That's when you open the floodgates. So I hope and I pray that our political leaders will just have to take this bull by the horns at some point. You can't run away from it.
(Reporting by Marc Jones; editing by David Stamp)