http://www.iht.com/articles/ap/2007/02/07/business/NA-FIN-US-Federal-Reserve-Plosser.php
Federal Reserve may have to start raising rates again, Fed's Plosser says
The Associated Press
Published: February 7, 2007
NEW YORK: Federal Reserve Bank of Philadelphia President Charles Plosser warned Wednesday that the economy's improving growth prospects are raising the odds the Federal Reserve may have to raise interest rates again.
"Additional monetary policy action may be needed to keep us moving along the path to price stability," Plosser said. "It is an open question whether our current monetary policy is sufficiently restrictive to return the economy to price stability over a reasonable horizon," he added.
"My own assessment is that with growth prospects of the economy improving, there is some risk that we may not see a return to price stability unless monetary conditions are further tightened," he said.
Plosser, who is not a voting member of the interest rate-setting Federal Open Market Committee, spoke in comments prepared for delivery before the Greater Philadelphia Chamber of Commerce, in Philadelphia.
Since coming to the Philadelphia Fed, Plosser has been one of the most hawkish central bank members, and his latest warning on monetary policy follows a FOMC meeting in which the Fed kept rates steady and appeared to suggest that it will do so for some time. Most private sector economists reckon that the current 5.25 percent overnight target rate will be in place for some time.
Plosser's speech was largely upbeat about the growth outlook, and he indicated the worst of the housing sector's troubles may be winding down. But price pressures are worrisome, he said.
"I considered inflation to be uncomfortably high in 2006, and inflation remains a primary concern of mine for 2007," Plosser said.
"While we got some encouraging inflation numbers toward the end of last year, I am not convinced that underlying inflation is on a downward trend," he said, adding, "I do not see the recent strength in labor compensation as necessarily inflationary."
Federal Reserve may have to start raising rates again, Fed's Plosser says
The Associated Press
Published: February 7, 2007
NEW YORK: Federal Reserve Bank of Philadelphia President Charles Plosser warned Wednesday that the economy's improving growth prospects are raising the odds the Federal Reserve may have to raise interest rates again.
"Additional monetary policy action may be needed to keep us moving along the path to price stability," Plosser said. "It is an open question whether our current monetary policy is sufficiently restrictive to return the economy to price stability over a reasonable horizon," he added.
"My own assessment is that with growth prospects of the economy improving, there is some risk that we may not see a return to price stability unless monetary conditions are further tightened," he said.
Plosser, who is not a voting member of the interest rate-setting Federal Open Market Committee, spoke in comments prepared for delivery before the Greater Philadelphia Chamber of Commerce, in Philadelphia.
Since coming to the Philadelphia Fed, Plosser has been one of the most hawkish central bank members, and his latest warning on monetary policy follows a FOMC meeting in which the Fed kept rates steady and appeared to suggest that it will do so for some time. Most private sector economists reckon that the current 5.25 percent overnight target rate will be in place for some time.
Plosser's speech was largely upbeat about the growth outlook, and he indicated the worst of the housing sector's troubles may be winding down. But price pressures are worrisome, he said.
"I considered inflation to be uncomfortably high in 2006, and inflation remains a primary concern of mine for 2007," Plosser said.
"While we got some encouraging inflation numbers toward the end of last year, I am not convinced that underlying inflation is on a downward trend," he said, adding, "I do not see the recent strength in labor compensation as necessarily inflationary."
