Fed's Plosser: inflation risk makes policy difficult

GLADWYNE, Pa., Jan 8 (Reuters) - Federal Reserve Bank of Philadelphia President Charles Plosser said on Tuesday the risks of higher inflation in the face of slower economic growth will pose a challenge for monetary policy this year.

In a speech before the Main Line Chamber of Commerce, the Philly Fed chief also said monetary policy today can do little to change a period of below-trend growth expected in the first half of 2008.

"I am concerned that developments on the inflation front will make the Fed's policy decisions more difficult in 2008," he said, reiterating recent data suggest inflation is becoming broad-based and the central bank must remain vigilant against price pressures.

A text of his remarks was made available in advance.

The Fed holds its next rate-setting meeting on Jan. 29-30, where markets widely anticipate another rate cut after three consecutive rate cuts since September. Plosser, known as one of the Fed's more hawkish officials, will be a voting member this year on the Federal Open Market Committee. (Reporting by Tamawa Kadoya, Editing by Chizu Nomiyama)