Dallas Federal Reserve Bank President Richard Fisher said on Tuesday the US economy was in for prolonged slow growth and could shrink later this year. "I expect that in the second half of this year we will broach zero growth," Fisher said in an interview with the Dallas Morning News. The outlook was for "a sustained period of anemic growth," he told the newspaper.
Fisher, a voting member of the US central bank's policy-setting Federal Open Market Committee, is seen as an inflation hawk and voted against the majority decision on August 5 to hold the benchmark federal funds rate at 2 percent.
Fisher said other US central bank members shared his worry about the risk of inflation and said that, if necessary, the Fed would act quickly to ward off any possibility that an expectation of rising prices sets in. "One of the things I have been concerned about ... is that we don't wish for these expectations to take grip and become part of the psyche of the way decisions are made in our economy," he said.
Fisher said a key source of weakness for the economy was that lenders have grown wary about making credit available in the wake of the subprime mortgage crisis. He said the current credit crunch was more acute than one that followed the savings and loan crisis in the early 1990s. "It's broader. It's deeper," Fisher said. "We go through these periods of correction. It's not unhealthy. It's the way capitalism works."