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Dallas Federal Reserve President Richard Fisher Tells Fox Business That the “Real Economy” Is Most Important

February 03, 2014 | About:

Dallas Federal Reserve President Richard Fisher spoke with FOX Business Network’s (FBN) David Asman about the economy. Fisher said, “The key for us is what's happening in the fixed income markets” and that, “Most important of all is the real economy.” When asked about the taper and the recent drop in the markets, Fisher said, "I'm not surprised to see a reaction.”

Excerpts from the report are below.

On whether the market slide is due to the Fed’s tapering:

“Well, I gave a speech on the 14th of January.  And as you know, the market peaked on the 16th.  But I think the title, if you remember, was how I felt that the market had been wearing beer goggles, that is, that everything looked great, but that valuations were out of whack with - in terms of prices, with underlying valuations. So the point I made in that speech is that I wouldn't deter my view, in terms of continuing to pare back on the amount of purchases we've been making if we had a market correction, as long as the economy was growing, as long as cyclical unemployment was coming down and the risk of demand driven deflation was a tail risk. And I don't -you can't say, that things have changed just because of this market action that's taken place.  We had it happen three times last year, of a similar type of magnitude. I want to remind you that the S&P has risen since - almost in a straight line, with some volatility, but since March 6th of 2009, from 666 to almost triple that level at the peak on the 16th of January of this year. So markets don't move in one direction.  The amount of stimulus we have been providing changes the discount factors that are applied to future cash flows and earnings.  And I'm not surprised to see a reaction. But the key for us is what's happening in the fixed income markets, 10-year bond, by the way, has rallied here.  The 7-year bond has rallied.  And most important of all is the real economy.”

On whether the Fed will continue along its current tapering course:

“All I can tell you is how I would vote.  And if that were the case, as you just stated it, that would not deter me for voting for continuing the reduction of our large scale asset purchases at its current pace.”

On whether he thinks the Fed has become a little too concerned about what the stock market thinks:

“Well, I don't feel that way because we had a unanimous vote at this last meeting and we took steps at the previous meeting and we continued them at the last meeting. Obviously, we're well aware and well briefed on what reactions might or might not occur and we decided to proceed. So I don't believe- but I can only speak for myself, of course -- but my own feelings are that my colleagues obviously take note of this, just as I do, but the key thing is how is the real economy doing and that's what drives our decision-making.”


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