By Jon Hurdle
PHILADELPHIA (MNI) – Philadelphia Federal Reserve President Charles
Plosser Wednesday said the Federal Open Market Committee made the U.S.
economic downturn seem worse than it was when it made its August
statement.
“The picture we painted was more negative than was justified,”
Plosser told reporters after a speech to real estate professionals at
the University of Pennsylvania.
He urged fellow Fed officials to focus on long-term influences on
the economy and to not overreact to short-term factors.
“The Fed needs to be careful not to overreact to short-term
events,” he said. “There’s a great temptation to be too short-term
focused.”
Asked whether the Philadelphia Fed’s monthly survey of
manufacturing in its district may have overstated local economic
problems in August and September, Plosser said the bank’s surveys were
taken during severe market turmoil and then when Hurricane Irene hit the
region.
“It’s not surprising that some of the impressions might have been
colored by events,” he said. “I suspect it played an important role” in
manufacturers’ responses to the survey.
The survey’s main diffusion index surprised market participants
with a sharply negative 30.7 in August and a negative 17.5 in September,
suggesting a severe decline in local business conditions.
In his conversations with manufacturers, he said he has heard
business is slow but not in a severe decline.
“They say things are slow and uneven but they are not falling off a
cliff,” he said.
Plosser, who in prepared remarks repeated that he does not expect a
double-dip recession, also rejected a comparison between the U.S. and
Japanese economies, saying the U.S. is not in a deflationary
environment, and has positive labor-force growth, in contrast to Japan
where the labor force is shrinking.
** Market News International **
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