Charles Plosser, President and Chief Executive Officer of the Federal Reserve Bank of Philadelphia is speaking to the CFA Society of Philadelphia and The Bond Club of Philadelphia today (Tuesday, September 25, 2012). While most Fed presidents remain upbeat about the most recent round of quantitative easing, Plosser has at least some comments that offer more insight and some more dissention inside the Fed.
Plosser sees better than the average for growth. He said, “I anticipate that the pace of growth will pick up somewhat to about 3 percent in 2013 and 2014 — a pace that is slightly above trend. That outlook places me near the high end of the central tendency of FOMC participants’ forecasts for 2013 and near the low end for 2014.”
On the fiscal cliff: “Our own fiscal policy is also uncertain. While I believe we will avoid the worst-case scenarios related to falling off the fiscal cliff, the U.S. needs to forge a path toward sustainable fiscal policy. These uncertainties constitute significant hurdles for the economy and are retarding near-term growth.”
On the most recent bond buying: “I opposed the Committee’s actions in September because I believe that increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment… my assessment is that the potential costs and risks associated with these actions outweigh the potential meager benefits… we are unlikely to see much benefit to growth or to employment from further asset purchases… recent actions risk the Fed’s credibility in other ways as well… the new asset-purchase program will exacerbate the challenges that the Fed will face when it comes time to exit this period of extraordinary accommodation, risking higher inflation and harm to the Fed’s reputation and credibility…”
JON C. OGG