Tying policy to jobless rate dangerous: Fed's Plosser

NEW YORK Thu Sep 27, 2012 7:55am EDT

Philadelphia Federal Reserve President Charles Plosser speaks at an Economics21 event in New York, March 25, 2011. REUTERS/Brendan McDermid

Philadelphia Federal Reserve President Charles Plosser speaks at an Economics21 event in New York, March 25, 2011.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - Keeping U.S. monetary policy extraordinarily loose until the jobless rate hits a defined level could be very dangerous, Philadelphia Fed President Charles Plosser said on Thursday.

"Tying policy to an unemployment rate, a specific unemployment rate, can be very risky and very dangerous," Plosser said in an interview with Bloomberg TV.

Two other heads of regional Fed banks -- Narayana Kocherlakota of the Minneapolis Fed and Chicago Fed President Charles Evans -- have proposed keeping rates low until employment falls to specific levels, as long as inflation stays under control.

Plosser, an inflation hawk, also told Bloomberg TV that the Fed was ready to act to counter risks from Europe's debt crisis but the nature of any such action would depend on what happens.

Plosser is not a voting member on the policy-setting Federal Open Market Committee this year.

(Writing by William Schomberg; Editing by Chizu Nomiyama)

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