News Column

Plosser: Rate Hike Likely Sooner Than Expected

May 20, 2014

WASHINGTON (Alliance News) - The Federal Reserve may raise interest rates sooner than expected if the US economy continues to speed up after the winter lull, according to Charles Plosser, president of the Philadelphia Fed.

He predicts the recover will pick up in the second of 2014 and into next year, prompting the Fed to "begin raising interest rates sooner rather than later."

Plosser sees unemployment dwindling below 5.9% by the end of this year.

Despite some recent weakness in the housing market, the US economy "is on the firmest footing it has been on since the recovery began," said Plosser.

"As we continue to move closer to our 2% inflation goal and the labor market improves, we must be prepared to adjust policy appropriately," he added. "That may well require us to begin raising interest rates sooner rather than later."

Plosser remains optimistic about the housing recovery, noting that even though sales have leveled off, prices are still rising, and fundamentals remain sound.

On monetary policy, he worries that the global financial system is becoming spoiled by unprecedented accommodation from central banks.

"Over the past five years, the Fed and, dare I say, many other central banks have become much more interventionist. I do not think this is a particularly healthy state of affairs for central banks or our economies. The crisis in the US has long passed," he said.

With a growing economy and the Fed's long-term asset purchases coming to an end, now is the time to contemplate restoring some semblance of normalcy to monetary policy.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Alliance News

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters