Friday's jobs report came in worse than many expected, but one Federal Reserve Bank President says it nevertheless brings the central bank one step closer to dialing back its controversial stimulus program.
In a Monday speech to the National Association of State Retirement Administrators, Dallas Fed President Richard Fisher said that "with the unemployment rate having come down to 7.4 percent, I would say that the Committee is now closer to execution mode, pondering the right time to begin reducing its purchases." However, he added the caveat that tapering would depend on a recovery that doesn't shift into reverse.
The question of when the Fed will "taper" its $85 billion monthly asset buys, known as QE3 because it is the third round of quantitative easing the bank has undertaken, has loomed over markets for months. In June, when Fed Chairman Ben Bernanke suggested that the Fed might taper its stimulus by the end of 2013, stock market indexes tanked and Treasury yields spiked.
Fisher reiterated in his Monday speech that he questions the effectiveness of quantitative easing. Among his worries is that the Fed has greatly expanded its balance sheet and now owns a "significant slice" of mortgage-backed security and treasury markets, which he believes will make shrinking that balance sheet a potentially difficult business.
"This is a delicate moment. The Fed has created a monetary Gordian Knot," he said, adding that the Fed needs to stop making the knot bigger.
Fisher last made waves when in June, after stock and bond markets reacted to Bernanke's taper remarks, he characterized market participants as "feral hogs" who want to test the Fed's resolve. Fisher on Monday described the U.S. as "the best-looking horse in the glue factory." While other major economies like the E.U. and China have their own problems, he explained, U.S. policymakers have been unable to create certainty for businesses.
Fisher dismissed elected officials' fiscal policy failings as "cavalier," blaming Congress and the president for not allowing businesses to take advantage of the "cheap and abundant fuel" the Fed has provided them.
"Ask any businessman or woman what holds him or her back and they will tell you it's not monetary policy," he said. "It is that they can't operate in a fog of total uncertainty concerning how they will be taxed or how government spending will impact them or their customers directly."