Richard Fisher, President of the Federal Reserve Bank of Dallas, addressed an attentive group of SBE members on 4 March at a meeting kindly hosted by HBOS, and sounded a cautionary note on inflation.

President Fisher, who had opposed the January FOMC decision to cut US official interest rates to 3 per cent, argued that these were particularly challenging times for central bankers; confronted by both slowing growth and rising inflation, but with just one policy instrument.

President Fisher and Bronwyn Curtis,
SBE Chair

Monetary policy should not, Professor Fisher argued, be oriented towards supporting economic growth at a time when inflation was uncomfortably high and inflation expectations risked being destabilised. 

Monetary policy, he suggested, should anchor inflation expectations, and the Federal Reserve’s overarching purpose should be to make sure that this anchor stayed firmly in place.

If this implied temporary economic slowdown, that was a necessary burden, however, politically inconvenient.