A senior member of the Federal Reserve has said the “feral hogs” of financial markets will not be able to bully the central bank into shelving its quantitative easing tapering plans.
In an interview with the Financial Times, Richard Fisher – president of the Dallas Federal Reserve and a member of the Federal Open Market Committee – said the bank expected a strong market reaction to the move.
Last week, Fed chairman Ben Bernanke said the central bank could consider slowing the pace of its $85bn-a-month bond-buying programme later this year if the economy continued to improve as expected. QE could be brought to a halt in the US during 2014, he added.
This prompted a global sell-off, with stockmarkets dropping off the near-record highs they reached over the first half of the year and other assets including bonds and gold taking significant hits to their price.
Fisher told the newspaper that financial markets – which have been propped up over recent years by the ultra-loose monetary policy of the world’s central banks – like to test policymakers but added that they should not expect the Fed to support the economy forever.
“Markets tend to test things,” Fisher said. “We haven’t forgotten what happened to the Bank of England [on Black Wednesday]. I don’t think anyone can break the Fed … But I do believe that big money does organise itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it.”
Fisher’s comments follow the publication of the Bank for International Settlements’ annual report, which argued that central banks should to scale back their ultra-loose monetary policy – arguing this now could be doing more harm than good.