In wake of QE taper, Fed's Plosser dusts off inflation warning

PHILADELPHIA Fri Jan 3, 2014 12:11pm EST

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

PHILADELPHIA (Reuters) - The Federal Reserve faces "immense" challenges now that it has reduced bond-buying, and needs to be cognizant of a rapid rise in future inflation, a top U.S. central banker said on Friday.

Philadelphia Fed President Charles Plosser, a voter on monetary policy this year, said the central bank's balance sheet is still growing at "a fairly rapid clip" despite the $10-billion reduction in monthly asset purchases, which started this month.

Dusting off arguments he and other hawkish officials made before the recent bout of low inflation, Plosser said he was less concerned about disinflation and more concerned about too-high inflation if banks start to quickly release the $2.4 trillion in excess reserves they now hold.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

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Comments (3)
As predicted before all this QE nonsense, now the other shoe falls. How to go about avoiding unavoidable inflation and still try to achieve maintenance of an economy which no longer has any real base to maintain. You cannot have an economy based upon advertisements and little else, just as you cannot maintain a corporation based upon stock performance with no source of real income. I see greatly rising unemployment and falling prices trying to entice non-existent demand ahead.

Jan 03, 2014 5:28pm EST  --  Report as abuse
crisque wrote:
ok, so if the fed stops QE`s mbs purchases that are roughly $ 40 billion a month, who`s gonna step up to the plate after what happened in 2008!? qe will only half taper it will have to keep buying mbs. Some economists have been saying that this we will never taper… looks like they’re right.

Jan 06, 2014 12:12pm EST  --  Report as abuse
crisque wrote:
ok, so if the fed stops QE`s mbs purchases that are roughly $ 40 billion a month, who`s gonna step up to the plate after what happened in 2008!? qe will only half taper it will have to keep buying mbs. Some economists have been saying that this we will never taper… looks like they’re right.

Jan 06, 2014 12:12pm EST  --  Report as abuse
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