Why Fisher Voted Against the 2nd Fed Cut

The January 30, 2008 50bps rate cut by the Fed had one member vote against the cut - Richard W. Fisher (see The Fed Doesn't Mess Around - Part II). In Fedspeak Highlights: Fisher on Tequila and the Punchbowl we find out why, from a speech Fisher gave in Mexico City. Some excerpts:

I spoke earlier of William McChesney Martin. He famously said that the job of a good central banker is to take away the punchbowl just as the party gets going. For the past few years, we have had a raucous party of economic growth fueled by an intoxicating brew of credit market practices that financed a housing boom of historic, and late in the cycle, hysteric, proportions. With the benefit of perfect hindsight, some have argued that the Fed failed to take away the punchbowl as the subprime party spun out of control, leaving rates too low for too long...

Monetary policy acts with a lag. I liken it to a good single malt whiskey or perhaps truly great tequila: It takes time before you feel its full effect. The Fed has to be very careful now to add just the right amount of stimulus to the punchbowl without mixing in the potential to juice up inflation once the effect of the new punch kicks in...

My dissenting vote last week was simply a difference of opinion about how far and how fast we might re-spike the monetary punchbowl. Given that I had yet to see a mitigation in inflation and inflationary expectations from their current high levels, and that I believed the steps we had already taken would be helpful in mitigating the downside risk to growth once they took full effect, I simply did not feel it was the proper time to support additional monetary accommodation.

Emphasis added.