Tags: Plosser | Fed | us | economy

Plosser: Need for More Fed Action Is Unlikely

Thursday, 29 March 2012 01:17 PM

It is unlikely that the U.S. economy will deteriorate or that prices will fall to such an extent that the Federal Reserve will have to consider taking more policy action, a top Fed official said on Thursday.

Less than a month before a much anticipated policy-setting meeting of the U.S. central bank, Philadelphia Fed President Charles Plosser said that although the Fed's easy money stance is still appropriate, current conditions do not warrant steps toward an even easier stance.

"We should not anticipate additional accommodation," Plosser, an outspoken policy hawk who does not have a vote on the Fed's policy-setting committee, said in prepared remarks to the Rotary Club of Wilmington.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

"Yet, should economic conditions significantly deteriorate or the upside risks to inflation I have stressed fall and significant risk of deflation emerge, we should rethink our policy stance," Plosser said in his second speech this week. "But neither of these events seems likely to me at this juncture."

Markets are abuzz with speculation that Fed policymakers could embark on a third, controversial round of large-scale bond buying, known as quantitative easing, or QE3, after Chairman Ben Bernanke this week stressed the need to ratchet down the still high 8.3 percent unemployment rate.

The central bank has kept interest rates near zero since late 2008, bought $2.3 trillion in assets in QE1 and QE2, and said it expected to keep rates exceptionally low through late 2014 in an unprecedented effort to revive the economy from the brutal recession.

Plosser repeated that, in the absence of "some shock that derails the recovery, we may well need to raise rates before the end of 2014," adding he is "generally optimistic" about the road to recovery.

"Until the economic environment becomes clearer," he added, "firms and consumers are likely to exercise some restraint in their spending and hiring decisions, thus limiting the pace of recovery, even while economic fundamentals in the U.S. continue to improve."

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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Thursday, 29 March 2012 01:17 PM
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