WELL, WE'VE DONE ENOUGH DAMAGE FOR NOW... (via Michael Herdegen):

Fed nearing end of tightening cycle — Fed's Fisher (Reuters, 6/02/05)

The Federal Reserve has room to raise interest rates further but is getting close to the end of its tightening cycle, Federal Reserve Bank of Dallas President Richard Fisher told CNBC TV Wednesday.

"I think we've room to tighten a little bit further," Fisher said, but, using a baseball analogy, added that the U.S. central bank is in the eighth inning of its tightening cycle and entering the ninth, and usually final, inning this month. Fisher became president of the Dallas Fed bank April 4. [...]

Fisher said the puzzling fall in long-term interest rates, despite the Fed's steady, year-long program of raising short-term rates, reflects the market's confidence that the Fed will do its job in keeping inflation under control.

Fed Chairman Alan Greenspan has called that phenomenon a "conundrum," but Fisher said he anticipates "less of a conundrum as we go through time." (Related: Demand keeps long-term yields low).

On the economy, Fisher said "we're going fine."

He played down concerns in financial markets about the country's wide current account gap, which includes the enormous trade deficit. He said the deficit reflects robust U.S. consumption, which is a key factor driving export growth in the rest of the world.

"Where would the world be if Americans did not live out their proclivity to consume everything that looks good, feels good, sounds good, tastes good?" he said.

"We provide a service for the rest of the world. If we were running a current account surplus or trade surplus, what would happen to economic growth worldwide and what would be the economic consequences? So I think we are doing our duty there," he said.

Let old men run the Fed and they'll fight old fights. The '70s are over.

Posted by Orrin Judd at June 1, 2005 9:12 PM