Fed at a 'tipping point' on monetary policy

DALLAS (CNNMoney) -- The nation's central bank is nearing a "tipping point" on its policy-making decisions, Dallas Federal Reserve President Richard Fisher said Friday.

In the delicate balancing act between its two main responsibilities -- promoting job growth and staving off inflation -- the Fed has been squarely focused on stimulating employment. But Fisher thinks the time has come to wrap up those efforts and shift policy in the other direction.

"Having done our job, I see many risks to the Federal Reserve overstaying its position," he said, speaking at a financial journalism conference in Dallas. "There is the risk that we might breach our duty to hold inflation at bay."

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Fisher has argued for months now that the Federal Reserve needs to start backing away from its efforts to stimulate job growth by pushing $600 billion into the economy. The controversial policy, known as the second round of quantitative easing or QE2, is scheduled to end in June -- and Fisher wants it to stay that way.

As gas and food prices continue rising, he thinks the Fed should even consider cutting the program before its end date.

"Indeed, it may well be that we should consider curtailing what remains of QE2," he said.

Considered one of the Fed's most outspoken inflation hawks, Fisher is concerned that rising prices could threaten economic growth sooner than later.

While inflation has not yet affected wages or home values, rising prices for raw materials have begun showing up in everyday products, cutting into the purchasing power of businesses and consumers.

"American businesses, like businesses in other countries, are doing their utmost to offset with higher prices the surging costs of inputs," Fisher said.

But Fed Chairman Ben Bernanke continues to shrug off rising gas and food prices as a "transitory" effect.

Fisher nodded to Bernanke's argument on Friday, but stressed that he believes further monetary stimulus could turn consumer inflation into a longer-term problem.

"Adding still more liquidity, or not withdrawing in a timely manner what we already provided in abundance, would do nothing to quell emerging inflationary pressures and might well compound them, proving doubly injurious to savers and the earnings of those who do have jobs," he said in prepared remarks.

Of the world's major central banks, the Federal Reserve has been perhaps the least worried about inflation.

On Thursday, the European Central Bank raised its key lending rate for the first time since 2008, to combat inflation. And the People's Bank of China raised rates earlier this week.

But unlike its counterparts around the world, the Fed looks at so-called core inflation that strips out volatile energy and food prices. Core inflation in the U.S. remains low at 1.1% even as energy prices have surged 11% and food rose 2.3% over the last year.

For that reason, most economists don't expect the Fed to end QE2 early, or even raise interest rates until at least the end of the year.