>

Not All Fed Governors Agree with Bernanke

July 12th, 2013
in econ_news

Fed's Plosser: Wind Down Stimulus Programs This Year

Special Report from Investing.com

by Investing.com Staff, Investing.com

plosser-160pxThe Federal Reserve should consider winding down its monetary stimulus programs later this year, Charles Plosser, President of the Federal Reserve Bank of Philadelphia, said Friday.

The Federal Reserve is currently buying USD85 billion in assets such as Treasury holdings and mortgage debt a month from banks to keep interest rates low, a monetary policy tool known as quantitative easing designed to jump start economic recovery.

Follow up:

The Federal Reserve has suggested such easing policies will stay in place until the unemployment rate approaches 6.5% from its current level of 7.6% provided inflation stays below 2.5%.

Those goals should serve as "triggers" and not "thresholds," Plosser said, meaning the Federal Open Market Committee (FOMC) should be ready to act ahead of reaching those targets to ensure prices remain in comfort zones.

Plosser, in prepared remarks of his speech at 5th Annual Rocky Mountain Economic Summit, said:

"The central tendency of the FOMC projections describes an economy accelerating in the second half of this year and into 2014. They anticipate growth of 2.3% to 2.6% for 2013 and accelerating to 3.0% to 3.5% in 2014. The central tendency projects that the unemployment rate will decline to 7.2% to 7.3% by the end of 2013 and reach 6.5% to 6.8% by the end of 2014. This is a faster pace of decline than previous FOMC projections anticipated."

Fed Chairman Ben Bernanke has said asset purchases may begin winding down this year and possibly end next year, though he has also said such policies will remain in place for the foreseeable future.

Sooner or later, such policies should end, said Plosser, a noted inflation hawk. He further said:

"The first step is to wind down our asset purchases by the end of the year in a gradual and predictable manner. As I said, I see little if any benefit from these purchases, and growing costs. The second step is for the FOMC to commit to its forward guidance on the fed funds rate path, that is, to begin treating the 6.5% unemployment rate and the 2.5% inflation rate in the guidance as triggers rather than thresholds."









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.













 navigate econintersect.com

Blogs

Analysis Blog
Econintersect Features
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Live Market Commentary
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
Live Market Conditions
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2015 Econintersect LLC - all rights reserved