Philly Fed’s Plosser Hawkish; Monetary Policy Reversal ‘Sooner Than Later’
Speaking in Philadelphia this morning, Philly FED president Charles Plosser says:
* The current “very accommodative” Fed policy will need to be reversed, “sooner than later”
* Tame Core inflation will not keep inflation expectations in check
* FED will have to back up words with action
*Monetary Policy should take headline inflation into account, as the public’s expectations influenced by persistently high headline inflation numbers
* Real fed funds rate -1% to -2%
* 2008: slow economic pace, 4% headline inflation
* 2008 unemployment is likely to get worse before it gets better
* Expect to see 2009 growth nearer to long-term trend