Tags: federal reserve | charles plosser | interest rates | nervous

Too Low US Rates Should Make Fed Nervous: Plosser

Tuesday, 11 November 2014 07:21 AM EST

Near-zero U.S. interest rates are too low and should make the Federal Reserve nervous, one of its top policymakers, Charles Plosser, said on Tuesday.

Plosser said in an interview with broadcaster CNBC that even though inflation was below the Fed's preferred level of 2 percent, there was no reason to keep interest rates at current crisis-era levels, especially with U.S. unemployment now so low.

"That are many indicators that tell us rates are too low," Plosser said.

"We have been at zero for nearly six years and there is no precedent in history, even when inflation is too low, to have rates at zero when unemployment rates are as low as they are," he said.

"We are really behaving in a way that is outside historical norms and that should make us nervous."

Plosser, who is due to step down as Philadelphia Fed president next March, is among the minority of Fed officials who want to close the book on ultra-easy monetary policy sooner than mid-2015, which is when most of his colleagues see a rate rise.

He also played down recent jitters in financial markets prompted by the prospect of a rise in interest rates and the potential negative impact on the U.S. economy from a climb in the dollar.

"There could be some reverberations of a higher dollar on some companies, on the U.S. economy, but I think it is going to be relatively small," Plosser said. "We shouldn't be responding to every little wiggle of the financial markets.

"Our job is not to suppress dollar volatility, not to suppress the adjustment of asset prices. We need to keep our eyes focused on our longer-term objectives."

© 2024 Thomson/Reuters. All rights reserved.


Finance
Near-zero U.S. interest rates are too low and should make the Federal Reserve nervous, one of its top policymakers, Charles Plosser, said on Tuesday.
federal reserve, charles plosser, interest rates, nervous
278
2014-21-11
Tuesday, 11 November 2014 07:21 AM
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