The most hawkish voting member on the Federal Open Market Committee said on Thursday that it's unclear whether slow growth will moderate inflation into 2009, and said there are even odds that inflation will accelerate from its current level.

Dallas Fed President Richard Fisher said it is "very likely we will suffer anemic growth for the current and perhaps the next couple of quarters." He conceded that growth has made better headway than most everyone expected in the second quarter, yet looking ahead he finds few reasons to be optimistic.

"I think it likely that our movement through the muck and the flotsam and jetsam of the credit and housing debacle will be sluggish, and it may take some time into 2009 for us to get the economy back up to a snappier cruising speed," he said in Houston, Texas.

On prices, Fisher said the jury is still out on whether inflation will moderate, but he said the most recent measures "are not particularly encouraging." He also commented that one has to go back to 1982 to find a similar headline inflation rate for personal consumption and expenditures, and that consumer price inflation has been rising in recent months.

On a brighter note, Fisher said the U.S. is growing as a global service provider.

"[A] close study of the numbers makes clear that as we move forward in time, our nation's comparative advantage in global markets increasingly lies in the service sector," he said, noting that the U.S. sold $1.1 trillion in goods to foreign customers in 2007.

He said that in 2007, Americans sold more in services than the next two largest service exporters combined.

"I could lull you to sleep with a recitation of each and every service sector, so let me just say that in over three-quarters of all trade categories classified by the Department of Commerce, the United States maintains significant comparative advantage relative to the rest of the world. We run a trade surplus in services," he said.

Fisher has dissented from the prevailing decision in each of the last five meetings, and has been the lone voice calling for a rate hike in the last two meetings.

By Patrick McGee and edited by Nancy Girgis
©CEP News Ltd. 2008