Philadelphia Federal Reserve Bank President Charles Plosser said Friday the U.S. central bank should acknowledge how close it is to its mandate of price stability and maximum employment, and change monetary policy to reflect the progress.
“I think it’s important that we acknowledge that we’re getting closer to our objectives,” Plosser said in an interview with Bloomberg TV from the Rocky Mountain Economic Summit in Jackson Hole, Wyoming. “And for me, it’s important we adjust monetary policy appropriately as we get closer to those objectives.”
Plosser, who is moderating a panel discussion at the conference Friday, said since the Fed is closer to its targets, the Federal Open Market Committee should already be raising rates.
“We should not be keeping interest rates at zero until we reach all our objectives,” he said. “For me, that would be a very uncomfortable position for the Fed to be in.”
This is a very different view from Chicago Fed Bank President Charles Evans who on the same program Friday said he would not vote to raise rates until 2016.
Plosser, though, said he’s worried about getting behind the curve when it comes to tightening policy. “We’re sitting at a point right now with historic amounts of accommodation. Unemployment’s 6%; inflation’s close to 2%; the question is ‘Are we already behind? And how far behind are we?'”
He warned getting behind the curve will risk the Fed’s credibility and policymakers may even lose control of inflation, adding if the FOMC waits to long to react, it could find itself having to raise rates “higher and faster” than they want to.
Plosser also weighed in wage growth, saying he saw it as a lagging indicator, and not something that was needed in order to see higher inflation.
He said wages have been rising faster than they have been in the past few years, “but they’re not rising rapidly,” he said.
Chicago’s Evans and Atlanta Fed Bank President Dennis Lockhart are also at the conference speaking on a panel about the success and failures of the U.S. central bank at 3 p.m. ET.