Stanley Fischer, US President Barack Obama’s pick for the No. 2 job at the Federal Reserve, said on Friday that decades of crisis-fighting have taught him the importance of making policy decisions quickly, even before all relevant data is in hand.
“We tend to underestimate the lags in receiving information and the lags with which policy decisions affect the economy,” he said in remarks prepared for delivery to the Stanford Institute on Economic Policy.
“Those lags led me to try to make decisions as early as possible, even if that meant that there was more uncertainty about the correctness of the decision than would have been appropriate had the lags been absent.”
His comments Friday came in a speech titled “Lessons from Crises, 1985-2014,” billed as a set of remarks about the past rather than reflections on current events. Still, his inclusion of this particular lesson, number eight on his list, may suggest an inclination to act rather than to wait in the face of uncertainty.
That could be a critical insight into the thinking of a man likely soon to become the most influential US central banker after Fed Chair Janet Yellen, just as the Fed faces the unprecedented task of unwinding its extraordinary stimulus measures launched in the depths of the last financial crisis.
At 70, Fischer is anything but an impetuous decision-maker. An economics professor for many years, he taught both former Fed Chair Ben Bernanke and European Central Bank chief Mario Draghi.
He spent seven years as the No. 2 official at the IMF during the Asian financial crisis, and headed the Bank of Israel from 2005 until the middle of 2013. In that role, he was known for decisions on interest rates that sometimes surprised markets.
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