Philly Fed Chief Warns That Inflation Is Too High: Rate Hikes Needed

Discussion in 'Economics' started by ByLoSellHi, Feb 7, 2007.


    Federal Reserve may have to start raising rates again, Fed's Plosser says
    The Associated Press
    Published: February 7, 2007

    NEW YORK: Federal Reserve Bank of Philadelphia President Charles Plosser warned Wednesday that the economy's improving growth prospects are raising the odds the Federal Reserve may have to raise interest rates again.

    "Additional monetary policy action may be needed to keep us moving along the path to price stability," Plosser said. "It is an open question whether our current monetary policy is sufficiently restrictive to return the economy to price stability over a reasonable horizon," he added.

    "My own assessment is that with growth prospects of the economy improving, there is some risk that we may not see a return to price stability unless monetary conditions are further tightened," he said.

    Plosser, who is not a voting member of the interest rate-setting Federal Open Market Committee, spoke in comments prepared for delivery before the Greater Philadelphia Chamber of Commerce, in Philadelphia.

    Since coming to the Philadelphia Fed, Plosser has been one of the most hawkish central bank members, and his latest warning on monetary policy follows a FOMC meeting in which the Fed kept rates steady and appeared to suggest that it will do so for some time. Most private sector economists reckon that the current 5.25 percent overnight target rate will be in place for some time.

    Plosser's speech was largely upbeat about the growth outlook, and he indicated the worst of the housing sector's troubles may be winding down. But price pressures are worrisome, he said.

    "I considered inflation to be uncomfortably high in 2006, and inflation remains a primary concern of mine for 2007," Plosser said.

    "While we got some encouraging inflation numbers toward the end of last year, I am not convinced that underlying inflation is on a downward trend," he said, adding, "I do not see the recent strength in labor compensation as necessarily inflationary."
  2. S2007S


    hmm, didnt see this one cross the cnbc ticker.
  3. duard


    We go down when big money winks at the FED I guess. Although comments like that are supposed to hint and let some air out of the bubble.

    Rotating bubbles: Housing, equities, commodities, housing again, equities again....
  4. MattF


    hinting though really by someone who isn't even a voting this doesn't hold very much water unless other fed chiefs start saying the same thing(s)...
  5. just talking down the euro id say..
  6. I don't think the fed could raise rates even if they wanted to.....a raise now would be the nail in the real estate'd literally have homeless people across the country.
  7. These guys send too many conflicting signals these days. It's almost as if it's some kind of power struggle.
  8. And Bies resigned today, suddenly, too - coincidence?

    There may be big time infighting at the fed.
  9. ....and Big Bear came out of hibernation today and has said there is no place to hide: Real estate, bonds, stocks all getting hit now.
  10. Corelio


    some kind of power struggle?! That has been going on for awhile now...
    #10     Feb 9, 2007