JACKSON HOLE, Wyo. (MNI) – In a CNBC interview prior to Federal
Reserve Chairman Ben Bernanke’s speech, Philadelphia Fed President
Charles Plosser said his FOMC dissent was partly because he thought the
statement was too pessimistic as well as because he believes keeping
rates low into 2013 is inappropriate.
Plosser said that while he marked down his 2011 outlook along with
everyone else, his 2012 outlook remained pretty much the same.
Of any QE 2.5 or 3, Plosser said he does not think additional ease
would be much help. He said the Fed should consider additional
accommodation if the markets become “dysfunctional” or if deflation
returns as a real threat.
Overall, he said the U.S. economy is still struggling to ramp down
an overinvestment in the financial sector. He said U.S. financial
institutions have cut their exposure to Europe dramatically over the
last two years.
The global uncertainty is maintaining a high level of caution in
the business community, he said.
Congress must develop a sustainable fiscal plan, he said, and its
debt ceiling debate did not help confidence.
“I thought that our description of the economy was overly
pessimistic,” Plosser said, “that the language we used was not as
optimistic as it might have been,” Plosser said that he also thought the
data did not justify the signal sent that the Fed was pretty pessimistic
about 2013 was also not appropriate.
Even if the pessimistic outlook was justified, he went on, “I was
concerned that now was not the time to make a policy decision. The data
had been very volatile, the stock market had been very volatile.”
“At the end of the day,” Plosser said he is still worried about how
all the “extraordinary” accommodation can be unwound.
** Market News International **
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