The shock win on Nov. 8 initially sent stock markets plunging, but equity prices have since recovered and bond yields risen in anticipation of the tax cuts and infrastructure investment he promised voters.
Fischer on Friday talked up the need for more fiscal policy, saying in a question and answer session following his speech that more economic stimulus from the government would “ease the task of monetary policy.”
“The phrase ‘the only game in town’ is a compliment in some ways -- but it’s not a compliment to the overall design of monetary policy, or economic policy of the country,” Fischer said. “There is fiscal policy, and in this particular instance, it could be used for quite a few reasons -- so we’ll have to see what happens.”
Continued economic strength is giving officials reason for confidence that a gradual, upward rate path will be appropriate. Unemployment is hovering below 5 percent, less than half the level of its 2009 high, and headline inflation moved up to 1.2 percent in the 12 months through September. That’s still shy of the Fed’s 2 percent goal, but core inflation -- which strips out volatile food and fuel prices -- has reached 1.7 percent.
“A noticeably faster U.S. recovery would require a more rapid removal of U.S. accommodation and could exert noticeably larger spillovers abroad by putting more upward pressure on foreign interest rates and by inducing larger depreciations of foreign currencies,” Fischer said. While uncertainty “is a constant feature of the landscape we confront as policy makers, both the U.S. and global economies will be served best if we keep our own houses in order.”
This story was provided by Bloomberg News.