The Federal Reserve's latest statement shows policymakers are committed to tying higher interest rates to economic data, not calendar dates, a top U.S. central banker said on Wednesday.
Charles Plosser, the hawkish head of the Philadelphia Fed, repeated in a speech that the central bank should continue adjusting its policy statements to prepare financial markets for the possibility of a sooner-than-expected monetary tightening.
Plosser, who is stepping down in March, is in the minority of Fed officials who want to hike rates before mid-2015, when many of his colleagues as well as investors expect the move to come.
Plosser, who had dissented against the Fed's previous two policy statements, on Oct. 29 backed the decision of the Federal Open Market Committee, despite a reference to rates staying low for a "considerable time."
His support, he said, was due to an addition that made clear a tightening could come sooner if the economy pans out better than expected, and later if the economy is worse.
"This is the operative language and it makes clear that the committee intends for policy to be data-dependent," Plosser said in remarks prepared for delivery to a UBS conference in London. "Given the progress to date, we must acknowledge and thus prepare the markets for the fact that interest rates may begin to increase sooner than previously anticipated."
Plosser repeated that inflation, while about 1.5 percent now, appears to be rising toward the Fed's 2 percent target. U.S. unemployment, at 5.8 percent, "continues to fall faster than many policymakers had been forecasting," he added.
Plosser, 66, plans to retire from the bank on March 1.
© 2023 Thomson/Reuters. All rights reserved.