Dallas Fed president foresees 'anemic' growth into 2009

— -- Richard Fisher, president of the Federal Reserve Bank of Dallas, has earned a reputation as a maverick among central bankers, dissenting from the majority at each of the five meetings in 2008 at which interest rates have been considered.

Fisher agrees with his colleagues that the economy will slow further — he says it'll reach a "snail's pace" — as it continues to be weighed down by a depressed housing market. Unemployment is likely to rise, he says.

But, Fisher says, inflation is too big a risk to ignore, even with recent declines in the prices of oil and other commodities. Lower interest rates tend to spur growth; higher rates combat inflation.

The consumer price index rose 5.6% in July from a year earlier, the largest increase since 1991.

Fisher, who is voting on interest rates this year following the usual rotation among regional Fed presidents, notes that the days of deflationary forces coming from abroad appear to be waning. Foreign wages and living standards are rising, and that's leading to greater demand for goods and services worldwide. The dozens of business executives at major companies he speaks to are continuing to face rising costs for the goods they buy, costs that must be passed along to consumers, Fisher says.

The Fed is expected to leave interest rates unchanged at 2%, the lowest since late 2004, when it meets Sept. 16, according to a market in which investors bet on future Fed moves.

Fisher, a former banker, money manager and government trade negotiator who joined the Fed in April 2005, spoke to USA TODAY's Barbara Hagenbaugh on Wednesday. The following are excerpts of that conversation, edited for clarity and length.

Q: How is the economy doing?

A: I still envision anemic growth the next couple of quarters. It's likely that our movement through all this muck and debris from the credit and housing debacle will be sluggish. And it's going to take us sometime into 2009 to get the economy back into what I call a snappier cruising speed.