Tags: federal reserve | plosser | growth | economy

Fed's Plosser Sees 3 Percent Growth This Year Keeping Taper on Track

Friday, 28 February 2014 09:58 AM

Federal Reserve Bank of Philadelphia President Charles Plosser, who votes on policy this year, said the Fed should press on with plans to trim its bond purchases with the economy likely to grow about 3 percent this year.

“I actually am optimistic about the longer-term growth of the economy,” Plosser said in an interview on Bloomberg Television’s “Surveillance” with Tom Keene. “What we’re seeing is that many of the things that held us back such as the deleveraging of household balance sheets are starting to wane.”

Plosser is among Fed officials trying to gauge the impact of harsh winter weather on the economy. Fed Chair Janet Yellen said in congressional testimony yesterday the central bank will probably keep tapering bond purchases as it reviews data to determine if recent weakness is transitory.

“We should be patient and not read too much into data that’s been very noisy” because of severe winter weather in much of the U.S., Plosser said. “We may not get a good handle on the economy for a few months and even then we’ll still be uncertain as we always are.”

Plosser said “fundamentals” such as corporate profits are supporting the advance in U.S. equities. The Standard & Poor’s 500 Index closed at a record 1,854.29 yesterday and last year surged 30 percent, the best performance since 1997. Seventy-four percent of companies in the gauge reported fourth-quarter results that exceeded analyst expectations.

“Earnings have been good for companies for the past several years,” Plosser said. “The economy is on firmer footing now than it has been for the past several years so I think most of the fundamentals are actually there.”

Slower Pace

Plosser spoke before a report today showed the world’s largest economy expanded at a slower pace in the fourth quarter than previously estimated on smaller gains in consumer spending, inventories and exports. Gross domestic product grew at a 2.4 percent annualized rate from October through December, compared with an earlier estimate of a 3.2 percent gain, according to figures from the Commerce Department.

Plosser said in a Feb. 5 speech in Rochester, New York he expects the economic recovery to continue as the jobless rate falls to 6.2 percent by year-end, warranting a quicker tapering of bond purchases. Plosser backed the first two cuts to the program in December and January, and said they “may prove to be insufficient” if growth keeps accelerating.

Fed policy makers meet March 18-19 to decide on the next step in their plan to reduce bond purchases at a “measured” pace. The Federal Open Market Committee last month pared monthly purchases by $10 billion to $65 billion, scaling back a program that has pushed Fed assets to $4.16 trillion.

Plosser, 65, became president of the Philadelphia Fed in August 2006. He was previously dean of the graduate school of business administration at the University of Rochester in New York State.


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Federal Reserve Bank of Philadelphia President Charles Plosser, who votes on policy this year, said the Fed should press on with plans to trim its bond purchases with the economy likely to grow about 3 percent this year."I actually am optimistic about the longer-term growth...
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2014-58-28
Friday, 28 February 2014 09:58 AM
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