In the event the U.S. goes off the fiscal cliff, don’t expect the Fed to shield markets from the worst. In an interview on The Kudlow Report last night, hawkish Dallas Fed president Richard Fisher told me he’d resist that kind of intervention.
“I do not see us as that kind of safety net,” he said. “There’s got to be a limit. In committee we’d have to decide what kind of limit, but there’s got to be a limit.”
That means if Congress plays partisan politics and a big tax hike kicks in, the first quarter turns negative, and lawmakers continue to scurry around Washington unable to reach a deal, don’t expect a massive bond-buying program.
It’s not coming.
Fisher went on to say that lawmakers have to step up, and if need be he thinks the Fed should force their hand.
“Fiscal authorities must get their act together,” he said. “We can’t just rely on monetary policy — we can’t have a monetary policy of infinity and beyond.”
Fisher added, “The Fed has been carrying the ball. But we can’t carry the ball all by ourselves.”
In short, Fisher is tired of the indecision in Washington. “The more we do at the Fed,” he said, “the more excuses politicians have to do nothing.”
It’s worth noting that Fisher emphasized that these are strictly his opinions and not those of Ben Bernanke.