Friday, February 6, 2015

Fed’s Plosser: Getting Hard to Justify Not Raising Rates

By Pedro Nicolaci da Costa

An improving U.S. economy and growing job market are making it more difficult for the Federal Reserve to justify its policy of near zero interest rates, Philadelphia Fed President Charles Plosser said Friday.
Mr. Plosser said he is keeping an eye on the recent drop in inflation, but argued central bank officials should look past it since most of the decline is attributable to sharply falling energy costs
Cheaper energy is “unambiguously positive” for the U.S. economy, Mr. Plosser told CNBC television in an interview.
“We’re getting to the point where it’s hard to justify not raising rates,” said Mr. Plosser, who will retire next month. “There’s a good justification for increasing rates earlier.”
The Fed brought official borrowing costs to zero in December 2008 and embarked on three rounds of bond buys to support economy growth and recovery. Mr. Plosser has often been a skeptic of the Fed’s more aggressive moves.
Late last year, Mr. Plosser dissented against the Fed’s decision to say it would remain “patient” in raising interest rates because he feared policy makers would be tying themselves down to specific dates rather than following the data. The Fed is expected to begin raising interest rates at some point this year, but the exact timing remains a subject of avid debate.
“The committee will have to figure out how to transition away from ‘patience,’” Mr. Plosser said.

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