Plosser: Promoting higher inflation won't lower jobless rate

The Federal Reserve should not raise its implicit inflation-rate target above 2 percent in an effort to lower the unemployment rate or inflate away bad debts, said Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia.

Plosser made the remarks in a prepared text for a speech to be given at the Union League of Philadelphia Tuesday afternoon.

Known as an inflation hawk, Plosser argued that Fed policymakers in the 1970s failed in their efforts to lower unemployment by allowing inflation to "steadily drift upward."

"The outcome was a steady rise in inflation with no commensurate fall in unemployment," he said.

In addition, he called himself "skeptical" of any strategy that would seek a higher rate of inflation to drive down short- and longer-term real interest rates and thus ease the debt burdens of individuals and businesses.

"Using inflation to assign winners and losers associated with these bad debts is poor monetary policy," he said.

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