“Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank should slow the pace of its bond purchases because the potential costs from more stimulus outweigh the benefits.
“We should begin to taper our asset purchases with an aim of ending them before year-end,” Plosser said in a speech prepared for delivery in Lancaster, Pennsylvania. “With interest rates already extremely low and the Fed’s balance sheet large and growing, monetary policy is posing risks to the economy in terms of financial stability, market functioning and price stability.”
The Federal Open Market Committee is debating how long it should continue $85 billion in monthly purchases of Treasurys and mortgage bonds aimed at boosting economic growth and reducing 7.9 percent unemployment. Chairman Ben S. Bernanke and Vice Chairman Janet Yellen in speeches this month affirmed a commitment to record stimulus pushing the central bank’s balance sheet beyond $3 trillion.
Even with the easing, the economy expanded just 0.1 percent in the fourth quarter amid the biggest drop in defense spending since the closing years of the Vietnam War.
“Beneath the very weak headline number, there were some signs of improvement in consumption, business investments and residential investments,” Plosser said. “Thus, there is reason to be somewhat optimistic for the coming quarters.”
Growth Accelerates…”
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