Federal bank official hints at possible end to interest-rate hikes

June 2, 2005

But Dallas Fed head still concerned about inflation

Inman News

The president of the Dallas Federal Reserve Bank hinted that the Federal Reserve might soon end its series of interest-rate increases, according to media reports.

Dallas Federal Reserve Bank President Richard Fisher, a voting Federal Open Market Committee member, reportedly said the country is in the "eighth inning" of a money-tightening cycle, media outlets said.

Bond markets rallied strongly on his words, betting they hinted of an impending pause in official rate hikes, Reuters reported.

Fisher's comments were reportedly made in separate interviews with CNBC Television and the Wall Street Journal. In the interviews, Fisher also said inflation remains a risk because of strong U.S. economic growth, according to reports.

The Treasury market viewed Fisher's remarks as indicating the central bank believes that inflation is well under control, leaving the Fed to focus more on the question of economic growth, economist Michael Wallace of Action Economics told Forbes.

But analysts told Reuters that markets had been selective in what they heard Fisher say, noting that no individual speaks for the Fed, apart from its chairman, Alan Greenspan, and other Fed policy-makers had hinted rates were heading higher.

Fisher, who joined the Dallas Fed in April, reportedly said in interviews that the Fed was in the eighth inning of monetary tightening.

Using a baseball analogy, Fisher implied the Fed was getting ready to pause, provided inflation stayed tame.

"We've gone through eight innings here, 25 basis points an inning," Fisher reportedly told the Journal, referring to the eight quarter-percentage point rate hikes made by the Fed since it began hiking borrowing costs this time last year.

"The next meeting in June is the ninth inning. We'll take a look after that. We may have to go into extra innings in this contest against inflation," Fisher reportedly said.

Baseball has nine innings, unless the two teams are tied and then they go into extra innings.

An adviser downplayed the significance of Fisher's comments.

"Those leaks don't come from new reserve bank presidents, they come from Alan Greenspan," Lyle Gramley, a former Fed Board governor and now senior economic adviser to the Stanford Washington Research Group, told Reuters.

Copyright 2005 Inman News

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