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Federal Reserve Bank of Dallas President Richard Fisher said he’s confident the central bank’s policies will help end a U.S. recession that threatens to raise unemployment to more than 10 percent this year.

“I consider our track record and our adaptability the stuff of an eventual recovery that will take my country to new levels of prosperity,” Fisher said in a speech today in Tokyo. “I am confident that the innovative policies being pursued by the Federal Reserve will facilitate and, indeed, expedite the recovery process.”

The U.S. unemployment rate reached 8.5 percent in March, the highest since 1983, and Fisher said it may surpass 10 percent by year end. While policy makers are aware that the Fed’s purchases of Treasuries and mortgage-backed securities may give Asian governments “some apprehension,” he noted that the dollar has appreciated against the euro and the pound in the past year despite the Fed’s moves.

“We’re beginning to see some healthy signs — the stirrings of what I call green shoots,” Fisher said after the speech when asked whether the Fed’s actions have yielded results. “Whether those are sufficient or not, time will tell.”

‘Grim’ Data

Fisher said U.S. economic data remain “grim” and the economy may have contracted in the first quarter at a rate similar to the 6.3 percent slump in the last quarter of 2008.

“Our economy faces a tough road,” Fisher said in the speech to the Japan Center for Economic Research, the Institute for International Monetary Affairs, and the Japanese Bankers Association.

The central bank is “duty bound to apply every tool we can to clean up the mess that our financial system has become and get back on the track of sustainable economic growth with price stability,” he said.

Fisher said after the speech that a rebound in confidence was key to a sustained recovery. “The growth path one can envision going forward will not be on the same slope as the one we had before” until sentiment recovers, he said.

Fed policy makers opened a new front in the battle to bring down borrowing costs across the economy in March, by pledging to buy as much as $300 billion of Treasuries and stepping up purchases of mortgage bonds 100% approval faxless payday loans. They’d already committed to buy or loan against everything from corporate debt, mortgages and consumer loans to government debt, after cutting the benchmark interest rate to a range of zero to 0.25 percent.

‘Did So Much’

Replying to a question suggesting the Fed wasn’t aggressive enough when the financial crisis began in mid-2007, Fisher said: “What markets have found unsettling seems to be that we did so much, rather than that we were slow to do anything.”

Fisher’s forecast for more than 10 percent unemployment goes beyond the expectations of any other Fed official. His projection of a first-quarter contraction of about 6.3 percent is steeper than the median estimate of 55 economists surveyed by Bloomberg, who expected a 5.2 percent drop.

Fisher, 60, is among the most hawkish members of the Federal Open Market Committee, having voted five times last year in favor of tighter policy. He doesn’t vote on rates this year.

“Confronted with a dysfunctional financial market and an implosion in our economy, in rapid order we have undertaken a series of very visible and widely broadcast initiatives,” Fisher said in the speech.

‘Interfering’

“We realize that by purchasing Treasuries in volumes and of durations that are atypical, we are at risk of being perceived as monetizing the fiscal largesse of our Congress,” he said.

Fisher said he was “acutely aware” that the Fed’s asset purchases may be “perceived as blurring the lines between fiscal and monetary policy,” giving rise to apprehension among large holders of Treasuries, such as Japan.

The Fed is attempting to take steps that “will not ignite the embers of either a future destructive inflation or a debasement of our currency,” Fisher said.

“Inflation is unlikely to present a serious threat” for the time being, he said. In addition, “fears of debasement in fixed-income portfolios invested in dollar-denominated public debt have proven unfounded.”

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