The Federal Reserve's policy of keeping interest rates at near zero is unprecedented and risky, a top Fed official said on Wednesday, given that inflation is heading toward the central bank's goal and the U.S. economy is approaching full employment.
Philadelphia Federal Reserve Bank President Charles Plosser said the Fed's preferred inflation measure is running somewhat below its longer-term target but is above the level that should stoke concerns of deflation.
Plosser, who is due to step down as head of the Philadelphia Fed next March, is among a minority of Fed officials who want to close the book on ultra-easy monetary policy sooner than in mid-2015, when a number of top Fed officials have signaled rates are likely to rise.
"Waiting too long to begin the process of raising the policy rate risks facing the possibility that the rate may have to increase rapidly when the time comes and that could prove unnecessarily disruptive," Plosser said in prepared remarks for a speech to the Charlotte Economics Club. "And waiting could also risk a more rapid pick-up in inflation."
Plosser repeated his view that the central bank should adopt a more rules-based approach to its monetary policy to improve transparency and to make its decisions more systematic.
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