THE FED: Hawkish Fed Voter Plosser Warns On Inflation
Mon, Mar 3 2008, 16:00 GMT
http://www.djnewswires.com/eu
THE FED: Hawkish Fed Voter Plosser Warns On Inflation
By Greg Robb
WASHINGTON (Dow Jones) -- One of the stalwart members of the Federal Reserve's hawkish camp said the central bank can't ignore the high inflation numbers forever, suggesting his willingness to support further rate cuts has its limits.
The comments came Monday from Charles Plosser, the president of the Philadephia Federal Reserve Bank.
Plosser told reporters after his speech that inflation expectations, the public's outlook for future price rises, have been creeping up lately.
Inflation expectations have emerged as a key indicator. Fed chief Ben Bernanke and other more dovish Fed members have said the central bank has room for aggressive rate cuts to counter the sharp economic downturn because inflation expectations have remained stable.
But Plosser suggested that all might not be well with these expectations.
"There are some signs they are creeping up a bit," Plosser said. "I'm not panicked about it," he said.
"We see more inflation than we'd like to see," Plosser said later. He said the situation was uncertain and there have been many times in the past that inflation has risen because of spikes in commodity prices, only to come down quickly.
Plosser said that he believed the U.S. would skirt a recession, with slow growth into the middle of the year and then a gradual improvement.
He said he also expected the housing market to improve in the second half of 2008.
In his speech, Plosser signaled that he was comfortable with the Fed's aggressive rate cuts to date.
He said that the level of the Fed's benchmark short-term interest rate was below the level suggested by several monetary policy rules, but said this was most likely necessary because of the turmoil in financial markets.
But Plosser said that rates could not remain at such low levels for too long or inflation would become a bigger concern.
"One cannot, and should not, ignore other fundamental aspects of policy, especially the tendency for inflation to accelerate when policy was unduly easy," Plosser said.
"We are now, perhaps, in a period of extraordinary circumstances and have deviated from the benchmarks suggested by simple rules. But such deviations should be temporary and promptly reversed when conditions return to normal," Plosser said.
Asked when conditions would be normal, Plosser said he wanted to see stability in financial markets.
"Stability in financial markets...is what we are trying to ensure," Plosser said.
He said the Fed was not going to solve the solvency problem for financial institutions.
This process was ongoing but would continue to be "bumpy," Plosser said.
(END) Dow Jones Newswires
By Greg Robb
WASHINGTON (Dow Jones) -- One of the stalwart members of the Federal Reserve's hawkish camp said the central bank can't ignore the high inflation numbers forever, suggesting his willingness to support further rate cuts has its limits.
The comments came Monday from Charles Plosser, the president of the Philadephia Federal Reserve Bank.
Plosser told reporters after his speech that inflation expectations, the public's outlook for future price rises, have been creeping up lately.
Inflation expectations have emerged as a key indicator. Fed chief Ben Bernanke and other more dovish Fed members have said the central bank has room for aggressive rate cuts to counter the sharp economic downturn because inflation expectations have remained stable.
But Plosser suggested that all might not be well with these expectations.
"There are some signs they are creeping up a bit," Plosser said. "I'm not panicked about it," he said.
"We see more inflation than we'd like to see," Plosser said later. He said the situation was uncertain and there have been many times in the past that inflation has risen because of spikes in commodity prices, only to come down quickly.
Plosser said that he believed the U.S. would skirt a recession, with slow growth into the middle of the year and then a gradual improvement.
He said he also expected the housing market to improve in the second half of 2008.
In his speech, Plosser signaled that he was comfortable with the Fed's aggressive rate cuts to date.
He said that the level of the Fed's benchmark short-term interest rate was below the level suggested by several monetary policy rules, but said this was most likely necessary because of the turmoil in financial markets.
But Plosser said that rates could not remain at such low levels for too long or inflation would become a bigger concern.
"One cannot, and should not, ignore other fundamental aspects of policy, especially the tendency for inflation to accelerate when policy was unduly easy," Plosser said.
"We are now, perhaps, in a period of extraordinary circumstances and have deviated from the benchmarks suggested by simple rules. But such deviations should be temporary and promptly reversed when conditions return to normal," Plosser said.
Asked when conditions would be normal, Plosser said he wanted to see stability in financial markets.
"Stability in financial markets...is what we are trying to ensure," Plosser said.
He said the Fed was not going to solve the solvency problem for financial institutions.
This process was ongoing but would continue to be "bumpy," Plosser said.
(END) Dow Jones Newswires
Tidak ada komentar:
Posting Komentar