Fed's Plosser sees growth amid more job gains
Federal Reserve Bank of Philadelphia president Charles Plosser said he's "fairly optimistic" that economic growth will exceed 2.4 percent for the rest of this year and next amid steady growth in jobs.
The expansion will probably slow to a 2.4 percent trend rate after 2015, Plosser, who votes on monetary policy this year, said Tuesday to the Economic Club of New York.
"The rebound after the bad winter seems to be progressing, the outlook for unemployment is a bit better, and the inflation rate appears to be firming," Plosser said. "Current data suggest economic strength is fairly broad-based, as witnessed by recent performance and the optimism expressed by firms in many manufacturing and service sectors."
Plosser and his colleagues on the Federal Open Market Committee (FOMC) are debating how long to keep the main interest rate near zero after completing asset purchases that are on pace to conclude by the end of the year. Officials on June 18 trimmed purchases by $10 billion for the fifth straight meeting while repeating that they plan to keep rates near zero for a "considerable time" after buying ends.
"The inflation rate appears to be firming," Plosser said, predicting it will "stabilize" next year at about 2 percent, which is the FOMC's target.
In an interview with Fox Business Network, he said he's not worried about short-term inflation.
The personal consumption expenditures index, the Fed's preferred inflation gauge, rose 1.6 percent from a year earlier in April, the most since November 2012.
The central bank is "not very good at forecasting inflation," Plosser said in response to audience questions.
Chair Janet Yellen, speaking at a news conference after the FOMC decision last week, dismissed concern about accelerating inflation, calling recent data on prices "noise." Plosser, who has consistently warned that record stimulus may eventually fuel inflation, backed the FOMC statement. The central bank has quadrupled its balance sheet since 2008 to $4.37 trillion.
The Fed will eventually need to ensure that money banks now hold on deposit at the Fed doesn't flood the financial system, fueling inflation. "Our biggest challenge is going to be trying to kind of control that flow of those deposits," he said.