Fed’s Plosser Sees ‘No Rush’ to Raise Rates as Taper on CourseJoshua Zumbrun
Federal Reserve Bank of Philadelphia President Charles Plosser said the Fed probably won’t hurry to raise the main interest rate if the unemployment rate falls to 6.5 percent, the threshold for considering an increase.
“There’s certainly no rush to raise rates just because we get to 6.5 percent,” Plosser, who votes on monetary policy this year, said to reporters after a speech today in Philadelphia. The unemployment rate fell to 6.7 percent last month, and Plosser’s remarks affirm the Fed’s statement on Dec. 18 that it will keep its benchmark rate near zero “well past the time” the jobless rate falls to 6.5 percent.
Plosser, who opposed the Fed’s bond purchase program last year, said he’s “reasonably pleased” with the Fed’s strategy, announced in December, to begin unwinding asset purchases. The central bank cut its monthly bond buying to $75 billion from $85 billion, and Chairman Ben S. Bernanke said further cuts are likely at each Federal Open Market Committee meeting this year.
Plosser called last year for the Fed to announce its total amount of bond purchases. He “would have been a little more committed” to tapering bond buying, he said. The FOMC said its purchase program, known as quantitative easing, isn’t on a predetermined path.
“They’re not on a preset course but the default option is to continue on this path unless something upsets us from that,” he said. “I’m pleased that we’ve started to unwind this. I’d prefer it to be a little faster. I don’t think it’s accomplishing very much.”
Fed district bank presidents rotate voting on policy, with Plosser beginning to vote again this month. He opposed QE for much of last year and in 2011 he objected to the Fed’s initiation of a bond purchase program known as “Operation Twist.” The FOMC is scheduled to meet Jan. 28-29.