Speaking in an interview with Dow Jones Newswires on Monday, Dallas Fed President Richard Fisher (voter) said growth in the U.S. could slow to zero or even turn negative in the second half of 2008, but the main issue remains whether inflation will become persistent or not.
"I could see us approaching, certainly, breaching zero," said Fisher commenting on GDP.
However, "The real concern I have as a central banker is whether or not [inflation] begins to affect the mentality of spending patterns by consumers [and] pricing patterns by producers," said Fisher.
The central banker added that there was a 50/50 chance that inflation will prove to be persistent rather than a one-off event.
While he acknowledged that the recent decline in energy prices was encouraging, it has yet to prove sustained, especially given recent increases in certain food costs.
He added that the path of interest rates will depend on upcoming events.
The rhetoric is consistent with previous comments from the Fed President who has public proclaimed himself an inflation fighter. He has dissented multiple times from FOMC decision to hold rates, opting instead for increases to the target for the Fed Funds.
By Erik Kevin Franco and edited by Stephen Huebl