Fed officials play down impact of weak dollar

HONG KONG/SINGAPORE: Federal Reserve officials on Thursday downplayed the consequences of the falling US dollar, underscoring that deflation is Where Re comes from & goes
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still a threat, especially with commercial real estate prices falling.

Dallas Fed President Richard Fisher said in an interview with Market News International that the weakening dollar, which hit a 15-month low against major currencies on Monday, is only one of the factors the Fed watches when setting policy.

"You pay attention to this," Fisher said in reply to a question about the effects of a weaker dollar.

"On the other hand, in terms of its inflationary input, unless it becomes disorderly, a depreciating dollar -- a gradually depreciating dollar -- doesn't necessarily add an enormous inflation impulse."

Fisher will become a voting member of the Fed's policy-setting committee in 2011.

The dollar has fallen 7 percent so far this year and likely has become a funding vehicle for bets on higher-yielding currencies in growing emerging markets.

Philadelphia Fed President Charles Plosser, answering journalists' questions after a speech in Singapore, was also not worried about dollar weakness.

"There's no particular reason you wouldn't expect the dollar to go back to where it was before the panic set in -- that is essentially all it has done at this point. I don't view that as anything particularly of concern," he said.