MercoPress. South Atlantic News Agency

Federal Reserve board member warns about “extraordinary speculative activity”

Richard W. Fisher expects that the planned 600 billion US dollars of Treasury purchases concludes next June

United States Federal Reserve Bank of Dallas President Richard W. Fisher said he sees “extraordinary speculative activity” in the US after the central bank pumped record amounts of stimulus into the economy.

“There is an enormous amount of liquidity sloshing around,” the regional bank chief, who votes on monetary policy this year, said in a speech this week in Berlin. “There is abundant liquidity in the machine we know as the United States economy.”

The Fed will likely complete its planned 600 billion US dollars of Treasury purchases in June, Fisher said, reiterating his view that no further monetary stimulus will be needed after that. The Dallas Fed bank president has criticized the plan, which policy makers voted to keep in place after their March 15 meeting in Washington.

“The word that we gave was that the program would end in June,” Fisher said in a television interview. “That’s what I expect to happen. And the markets have in my opinion adequately discounted that.”

Fisher repeated remarks he made earlier in Frankfurt that he’s seeing signs of excess evidenced in the surge of so-called covenant-lite loans and the return of payouts by private equity firms.

“We have done our job,” Fisher said at a forum hosted by the American Academy in Berlin. “We are certainly at risk of doing too much now”.

The US economic recovery is “self-sustaining” and will withstand turmoil overseas, Fisher said in the Bloomberg Television interview. The earthquake in Japan may impact the US economy through some “price and supply chain effects short term,” and the “wars in North Africa” won’t have a “long- term impact on the nature of monetary policy,” Fisher said.

“These can of course pinch a nerve or they can give you a bit of a shiver,” Fisher said. “I don’t think they’re going to derail what’s happening in terms of the economic growth occurring in the US or in Europe.