Wednesday, March 23, 2011

Federal Reserve official: 'we've done a bit too much' Quantitative Easing (printing money)

The Federal Reserve has "done a bit too much" quantitative easing amid signs "of speculative excess" in the the US, according to a senior official at the central bank.

Richard Fisher, who heads the Dallas branch of the Fed, said that the world's biggest economy is no longer in need of further stimulus and the real question is when to begin tightening monetary policy. To embark on a third round of quantitative easing (QE) would "only prolong the injustice inflicted" on savers through inflation, Mr Fisher said.

The Fed started a second, $600bn (367bn pounds) round of QE in November in an effort to ward off the threat of deflation and ignite a recovery that has made little dent in unemployment. The move sparked criticism outside the US that it would fuel inflation, while domestic opponents argued it threatened to debase the dollar.

Mr Fisher, who become a voting member of the Fed's rate-setting committee this year, said in a speech in Frankfurt that "there's lots of liquidity sloshing around the US financial system. We are seeing signs of all the intoxication that typically takes place when we have the ambrosia of cheap and readily available capital." (read more)