FRANKFURT (Reuters) - A Federal Reserve official asked for a clearer fiscal outlook from political leaders on Thursday, saying that leaving it to the Fed to lead economic recovery efforts created a dangerous predicament.
Dallas Fed President Richard Fisher called for more action from the U.S. government to boost employment, saying there were limits to what monetary policy could do.
“We at the central bank have been carrying the load and this is a very dangerous predicament,” Fisher, a self-described anti-inflation hawk, said during a lecture in Frankfurt.
The Federal Reserve said in its Beige Book report on Wednesday that the U.S. economy had performed at a “measured” pace in recent weeks and hiring remained modest.
“Monetary policy provides simply the fuel, but the incentive has to come from our fiscal authorities,” Fisher added.
“The gas tank is full (with liquidity) and now we have to get someone to ... step on the accelerator to propel the job-creating machine in the United States. There is a limit to what a monetary authority can do. All we can do is provide liquidity.”
U.S. political leaders are trying to broker an agreement to avoid a “fiscal cliff” - automatic spending cuts and tax increases early in 2013 unless Congress agrees an alternative - which threatens to derail growth in the world’s biggest economy.
“I’m not advocating one solution or the other,” Fisher said with respect to U.S. fiscal policy. “I’m begging for greater certainty.”
He added that a temporary fix would not help employment.
Fisher said the Fed would tighten monetary policy when needed but “we are not there yet”.
Fisher, who is a critic of easy Fed policy, also said he would like the central bank to define how far it is willing to go with its monetary stimulus.
“I personally advocate that we do it sooner,” he said.
Asked when the United States would see a substantial improvement in employment, Fisher said: “Only when we will get clear signals from the fiscal authorities.”
“You can’t expect somebody to hire somebody ... until you have confidence you will get a return on the cost.”
“From a monetary standpoint, we have given the fuel ... now it’s up to the private sector to engage. And it won’t happen until we get clarity on the fiscal side.”
Reporting by Eva Kuehnen and Paul Carrel; editing by Stephen Nisbet