Philadelphia Federal Reserve Bank President Charles Plosser spoke with FOX Business Network’s (FBN) Maria Bartiromo during Opening Bell with Maria Bartiromo about the economy. Plosser said, “I think the economy is in a pretty good place, that we are growing, not as robustly as some people would like to see, but at a pretty steady pace.”  He also spoke about inflation, saying, “I would like to see inflation creep up a little bit, the Fed has established an inflation target of 2 percent, something I felt very strongly about and we did, and I think it’s important that we defend that target…so we are a little low but I’m expecting inflation to begin to drift back up towards the target over the next year or two.”

Charles Plosser

Excerpts from the report are below.

Charles Plosser On the economy and how tapering and raising interest rates will play out:

“Well, it depends on the economy, obviously, how it plays out, but for right now I think the economy is in a pretty good place, that we are growing, not as robustly as some people would like to see, but at a pretty steady pace.  And I expect that will continue; I expect we will see close to 3 percent growth this year and maybe a little less next year, but we’re kind of on a long run track.  And I think the unemployment rate will continue to fall; I think we will be close to 6 percent probably by the end of this year, give or take a little bit.  That is all good news.   And the tapering I think I’m glad we started.  I would have preferred that we’d moved a little faster but I think we’re on a good path.  And as the committee has said, the hurdle is pretty high for us to change this pattern that we’re on.  So unless things really either pick up a lot or deteriorate a lot, we will probably see an end to this program in the fall sometime.”

Charles Plosser On what the economy will be like once the taper ends:

Well, I think we’re going to be about where we are.  I think you’re going to see more of this sort of 2.5 to 3 percent growth, steady but slow — steady declines in unemployment for a while. And I think that will be fine.”

On whether he worries that inflation is creeping up:

“Well I would like to see inflation creep up a little bit, the Fed has established an inflation target of 2 percent, something I felt very strongly about and we did, and I think it’s important that we defend that target and we credibly commit to defending that target, so we are a little low but I’m expecting inflation to begin to drift back up towards the target over the next year or two.”

On whether there is a while to go before inflation drifts up:

“It depends on how fast it drifts up, that’s one of the things no one is quite sure about. Economists have a hard time predicting inflation over the very near term, the dynamics of it are sometimes hard to discern but I think we’re going to drift back towards our target and I think that will be useful.”

On why that’s useful:

“Because it is important that we defend the target that we established and primarily, from my perspective, our own credibility.  And I think we have to reinforce that, that we will allow monetary policy to evolve over time in a way that we will achieve that goal, because we said that’s what we were going to do.”

On what the biggest risk is to the US economy currently:

“I don’t think there are any huge risks. Clearly circumstances in Ukraine are geopolitical risks that who knows what will happen there or what we can do about it even if it does happen. A lot of people worry about China and what’s going on there. I think we worry probably a little too much about China, in my own view.  So I think the world economy will continue to grow, so I am basically an optimist.”

On what he would like to see in terms of fiscal policy to give the economy the boost we need:

“Well, I’m not sure fiscal policy, at least in the traditional sense, is the kind of boost we need.  We do have a problem with fiscal policy.  It’s a long run problem, though, it’s not necessary a short run problem.  The long run problem is obviously whether or not we have sustainable fiscal policies in place and we haven’t really — unfortunately we really haven’t addressed that problem yet.”

Charles Plosser On whether Russia is an issue:

“I think the Fed is always looking around the world for things that might impact financial developments but so far we haven’t seen any major impact in this country, at least as of yet.”

Charles Plosser On food inflation:

“It’s very volatile and a lot of things move around a lot, we all know energy moves around a lot and food moves around a lot, there are other elements of inflation that move around a lot so the challenge is always looking through those volatile elements and trying to discern what the underlying trend of inflation is and that’s a little trickier to do.”

On where he expects the economy to be in 2015 and whether interest rates will be raised:

“I certainly think we won’t start raising interest rates as long as we’re still buying assets, that’s sort of a contradiction to each other so we have to stop buying that first. After that it will depend on the economy. Janet said at her press conference, she mentioned six months but she said it really depends on how the economy shapes up over that time, what happens to the labor markets, what happens to inflation and the economy and that’s really what it depends on.”

On what the most important metric is to determine whether to raise interest rates:

“I still think unemployment is a pretty important statistic for the labor market. It’s not the only statistic to look at of course, we’re terribly worried and we should be about long-term unemployment and how that’s going to play out, a lot of temporary workers still out there working that we would prefer to see but we can’t fix all those problems, at least in terms of monetary policy but we are aware of them and they add to our mosaic if you will of what the labor market’s doing.”

On how concerned he is about the participation rate being so low:

“I’m not as concerned as some people are, I think some research at the Philadelphia Fed for example has shown that about 75 percent of the people who have left the labor force since the beginning of the recession have been either retirees or gone on disability, they’re not coming back, these are people perhaps they lost their job but they were going to retire anyway in a few years and they moved that up. Is that a good or a bad thing? I don’t know if we can judge that but it’s certainly a statement about demographics, about the aging of our

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