Fed’s Plosser: slow growth a concern, but inflation complicates remedy

January 08th, 2008 | Category: Federal Reserve, Housing

Federal Reserve Bank of Philadelphia President Charles Plosser indicated that further interest rate reductions may be needed to stimulate the U.S. economy, should profitable growth become “substantially weaker” than already projected, Bloomberg News reported Tuesday.

“A considerably weaker outlook than expected, particularly whether that weakness is projected to be more prolonged than anticipated, may require further adjustments to policy,” Plosser said in a speech in Gladwyne, Pennsylvania, adding that he already expects several “sluggish” quarters of growth, Bloomberg News reported.

However, Plosser plus told Reuters that he’s “concerned that developments on the inflation front will form the Fed’s policy decisions more difficult in 2008.”

The Fed’s preferred degree

of consumer prices has risen 2.2% on a November 2006-November 2007 basis, or at a rate above the Fed’s consolation zone, main many economists to argue that the Fed may not be as stimulative as it typically would be at that stage of the profitable cycle. The Fed may plus continue to use non-interest rate policy options to energize profitable activity, these economists say.

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