Philadelphia Federal Reserve Bank President Charles Plosser said today that he does not believe that US monetary policy would be well-served by further accommodation. Additional Fed bond purchases “could lead us down a very treacherous path — one that would be ever more difficult for us to navigate and one that would increase the already substantial risk of higher inflation.”
Plosser also noted what he believes is the biggest threat to further US economic recovery:
The most significant and identifiable risk on the horizon is the potential effects of the continuing sovereign debt crisis in Europe. … [T]he economic slowdown in the euro zone will likely exert a small drag on U.S. exports. And while European financial institutions have so far endured through the financial market turmoil in Europe, we must continue to monitor events to ensure that these troubles do not spill over to U.S. financial institutions.
He also said that he sees the US employment situation improving and thinks that US inflation will remain “moderate” in the near term.
The full text of Plosser’s speech is available here.
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