UPDATE 1-Fisher warns Fed's bond buying could be distorting U.S. financial markets

miércoles 5 de marzo de 2014 22:51 GYT

MEXICO CITY, March 5 (Reuters) - A U.S. Federal Reserve policymaker who has long criticized its bond-buying stimulus said on Wednesday the program has lasted too long, and there are signs it is now distorting financial markets and encouraging risk-taking.

In a speech in Mexico City, Dallas Fed President Richard Fisher amplified some lingering concerns that the central bank's policy stimulus is stoking asset-price bubbles that "may result in tears" for investors acting on bad incentives.

"There are increasing signs quantitative easing has overstayed its welcome: Market distortions and acting on bad incentives are becoming more pervasive," he said of the asset purchases, which are sometimes called QE.

"I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis," he said in prepared remarks to the Association of Mexican Banks.

Fisher, a voter on U.S. monetary policy this year, also praised Mexico's moves to stimulate growth in the wake of the global recession. As for the United States, he repeated criticisms that the government has failed to take advantage of the five years of easy Fed money, missing its opportunity to restructure debt and to reform entitlements and regulations.

The central bank has kept interest rates near zero since late 2008 and has bought more than $3 trillion in Treasury and mortgage-based bonds to lower longer-term borrowing costs, and stimulate hiring and growth.

The U.S. economy expanded at a decent 2.4 percent rate in the fourth quarter but has slowed this year thanks in part to severe winter weather.

"I do think we have had some short-term weather impact but that can turn around very quickly," Fisher said, adding that warmer temperatures would boost consumption and industry.   Continuación...