By Pedro Nicolaci da Costa
McALLEN, Texas (Reuters) - High gasoline prices are dampening U.S. economic growth, but the Federal Reserve has already done all it can to support the recovery, Dallas Federal Reserve Bank President Richard Fisher said on Thursday.
"It is already having a retarding effect," Fisher told a group of business executives.
He predicted the process of rebounding from a steep recession would continue to be slow.
"(The economy) is gathering steam, but robust is not a word I would use," he said.
Fisher, an inflation hawk who opposed the Fed's decision in November to buy $600 billion in U.S. government bonds, said he was still not sure when the right time might be to begin pulling back on the stimulus.
But Fisher did indicate he already felt the central bank had gone a bit too far.
"We've gone from too little liquidity to too much," Fisher said.
A steep retreat in oil prices suggests this liquidity and the speculative activity it generates -- not just strong demand from emerging markets-- are driving the market, Fisher said.
"What the correction indicates to me is that there's a lot of liquidity out there," Fisher told reporters after a speech. That puts him at odds with other top Fed officials, who have argued that the Fed's ultra-loose monetary policy cannot be blamed for driving up commodity costs.
Asked about the Fed's exit strategy, Fisher said investors should not prejudge the outcome based on minutes from the central bank's April meeting that hinted that many officials favor interest rate hikes rather than asset sales.
Fisher, who worries that the Fed's bloated $2.7 trillion balance sheet could spark future inflation, has expressed a preference for asset sales in the past.
In response to the worst financial crisis in generations, the Fed not only slashed benchmark interest rates to effectively zero but also engaged in an unprecedented program of bond purchases aimed at keeping down long-term borrowing costs.
(Reporting by Pedro Nicolaci da Costa; Editing by Andrea Ricci)