The Federal Reserve Bank needs to take its foot off the economic gas pedal by
the end of the year, a Fed official said Wednesday.
Charles Plosser, president and chief executive officer of the Philadelphia Federal Reserve Bank, urged the Fed to phase out its ongoing effort to stimulate the economy by purchasing $85 billion in assets a month.
Plosser said the "potential costs outweigh the potential benefits" of continuing to purchase these longer-term assets.
"I would like the FOMC (Federal Open Market Committee) to begin to taper these purchases with an aim toward ending them before the end of this year," he said.
Plosser spoke to the annual meeting of the Economic Development Co. of Lancaster County and EDF Finance at the DoubleTree Resort. About 300 people attended.
"...(T)he FOMC will likely need to begin stepping back from the extraordinary accommodation it has been applying" to keep inflation in the 2 percent range, he said.
Plosser said that while Fed actions to keep interest rates low and stimulate the economy (while deepening the deficit) are intended to fuel demand, "they could actually do the opposite."
These actions make consumers save more and spend less, in turn making businesses pull back, he explained.
Uncertainty over U.S. fiscal policy, as evidenced by the sequester, also is making businesses cautious, Plosser said.
In the business part of Wednesday's meeting, EDC chairman John Cox announced an initiative to boost business recruiting and another to spur development of troubled properties.
The EDC has hired Atlas Advertising to evaluate the EDC's current efforts to bring new businesses here.
Atlas also will develop a new marketing plan, so EDC becomes more proactive and less reactive, and make the EDC website more informative.
The second initiative will involve working with municipalities to find ways to identify and redevelop properties that have barriers preventing them from being upgraded.
Also at the meeting, the EDC honored Calvin Levis, past EDC chairman and president of Huth Engineers, and Fulton Bank with its Founders Award for distinguished leadership in economic and community development.
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