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16 Oct 2014
Fed's Plosser: Rate hike may come sooner than expected
FXStreet (Łódź) - Speaking at an event in Allentown, Pennsylvania on Thursday, Philadelphia Fed president Charles Plosser suggested that in the light of the current economic developments in the US the FOMC could decide to raise rates sooner and more gradually than previously anticipated, but preparing the markets for the move in advance.
Plosser remains optimistic on the prospects for the US economy and sees 3% growth this year on the back of increased consumer and business spending, before it reverts to trend at 2.4% next year. He also pointed to the improvements on the labor market and the gradual climb of CPI towards the Fed's 2% target.
"Raising rates sooner rather than later reduces the chance that inflation will accelerate and, in so doing, require policy to become fairly aggressive with perhaps unsettling consequences," Plosser stressed. "Waiting too long to begin raising rates — especially waiting until we have fully met our goals for maximum employment — is risky because we cannot know when we have arrived."
The FOMC's first step towards normalizing policy should be done through adjusting its forward guidance, the Fed policymaker suggested.
USD/JPY rose on the news to 105.90 from 105.80
Plosser remains optimistic on the prospects for the US economy and sees 3% growth this year on the back of increased consumer and business spending, before it reverts to trend at 2.4% next year. He also pointed to the improvements on the labor market and the gradual climb of CPI towards the Fed's 2% target.
"Raising rates sooner rather than later reduces the chance that inflation will accelerate and, in so doing, require policy to become fairly aggressive with perhaps unsettling consequences," Plosser stressed. "Waiting too long to begin raising rates — especially waiting until we have fully met our goals for maximum employment — is risky because we cannot know when we have arrived."
The FOMC's first step towards normalizing policy should be done through adjusting its forward guidance, the Fed policymaker suggested.
USD/JPY rose on the news to 105.90 from 105.80