Tags: Federal reserve | Charles Plosser | easing | unwinding

Fed's Plosser 'Very Worried' About QE and Its Unwinding

By    |   Thursday, 06 March 2014 12:30 PM

Philadelphia Federal Reserve President Charles Plosser has serious concerns about the Federal Reserve's quantitative easing program (QE) and the process to unwind it.

"I am very worried about the potential for unintended consequences of all this action. And it's very difficult for us to know because we've never done this before," he told CNBC.

Extinguishing QE will be "very challenging," Plosser said. "Sometimes if you don't have Plan B, you don't have a plan."

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The Fed has reduced its bond purchases by $20 billion a month (in two steps) down to $65 billion. And central bank officials have indicated they will likely continue to taper by $10 billion at each policy meeting, ending QE late this year.

Meanwhile, Plosser said the U.S. economy is still enduring "lasting effects" of the 2007-09 recession and "may never return" to its previous growth rates.

"To keep trying to think that we're going to do that, means that we keep trying to overplay our hand in terms of policy," he said.

The economy grew 2.4 percent annualized in the fourth quarter and is "pretty close" to its equilibrium rate, Plosser said.

Looking globally, Mohamed El-Erian, outgoing CEO of Pimco, says central banks around the world are set to diverge on policy, as their economies grow at different speeds.

In order of policy tightness, the big four central banks will shake out like this: the Bank of England will be the tightest, then the Federal Reserve, followed by the European Central Bank, while the Bank of Japan will be the loosest, El-Erian predicted in the Financial Times.

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Philadelphia Federal Reserve President Charles Plosser has serious concerns about the Federal Reserve's quantitative easing program (QE) and the process to unwind it.
Federal reserve,Charles Plosser,easing,unwinding
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2014-30-06
Thursday, 06 March 2014 12:30 PM
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