Federal Reserve Bank of Dallas President Richard Fisher said the Fed can’t avert “fiscal perdition” as lawmakers wrangle over how to avert $600 billion in tax increases and spending cuts threatening economic growth.
“The Federal Reserve has been carrying the ball for the fiscal authorities by holding down interest rates in an attempt to stoke the recovery while the fiscal authorities wrestle themselves off the mat,” Fisher said Thursday in prepared remarks given in Stanford, California. “But there are limits to what a monetary authority can do.”
President Barack Obama said Wednesday that voters sent a “very clear message” on Election Day that they want both parties to cooperate and cut the budget deficit. If Congress doesn’t act by the end of 2012, automatic spending cuts and tax increases are scheduled to take effect starting in January, resulting in what the Congressional Budget Office predicts will be a recession.
“Only the Congress of the United States can now save us from fiscal perdition,” Fisher said at Stanford University. The Fed can’t “endlessly” keep purchasing bonds to keep the recovery going, he said.
The U.S. central bank affirmed a plan on Oct. 24 to keep buying $40 billion in mortgage bonds a month, seeking to bolster growth and reduce unemployment.