Investing.com - The 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.
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.
"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," Plosser said in prepared remarks of his speech at
5th Annual Rocky Mountain Economic Summit.
"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
Sooner or later, such policies should end, said Plosser, a noted
"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."
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