RPT-UPDATE 2-Fed's Fisher-Open to all options to restore credit

(Adds quotes, background, Q&A response)

By Mark Felsenthal

WASHINGTON, Oct 12 (Reuters) - The U.S. Federal Reserve will consider all options in seeking to stabilize credit markets in a period that may bring negative growth, Dallas Fed President Richard Fisher said on Sunday.

"The Federal Reserve will continue to explore every avenue and consider every option" to restore normal behavior in credit markets, Fisher said in remarks to the Institute of International Finance.

Fisher said he was deviating from the common practice of Fed officials representing only their own views in speeches and was instead speaking for "all of us."

Fisher said current financial turmoil will sharply cool the U.S. economy, possibly sending it into a contraction for an extended period.

"It will be likely manifesting itself in a painful period of adjustment of subpar and even negative growth for some time, possibly well into 2009," he said.

U.S. and European central banks cut rates in unison last week as part of extraordinary efforts by governments to halt a terrifying meltdown in financial markets. Finance ministers and central bankers pledged at meetings in Washington this week to take steps to ensure bank deposits are guaranteed and to prevent major financial institutions from failing, but stopped short of committing to coordinated steps.

The Fed will "devote every ounce of its collective energy" to restore normal market functioning, and will work with other agencies domestically and internationally, Fisher said.