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Fed's Plosser-string of rate cuts should aid growth
CHICAGO, April 18 (Reuters) - The federal funds rate is now low enough to boost economic growth as the impact of previous interest rate cuts starts to kick in, Philadelphia Federal Reserve President Charles Plosser said on Friday.
"An accommodative level of real interest rates ... should support the market forces that will bring economic growth back toward its long-term trend," Plosser said in remarks prepared for a speech at Drexel University in Philadelphia.
The real fed funds rate, or the actual rate minus the expected rate of inflation, is negative for the first time since 2003-2004, Plosser said.
But Plosser, who voted against the Federal Open Market Committee's decision in March to lower the federal funds rate by 75 basis points, said seeing rate cuts as a solution to most economic ills was "a dangerous misconception."
"The role of monetary policy is to ensure the stability of the purchasing power of the nation's currency, so that markets are not distorted by inflation," Plosser said.
"To ensure the credibility of monetary policy, we should never ask monetary policy to do more than it can do," he said.
A copy of Plosser's remarks was made available in advance. (Reporting by Ros Krasny; Editing by James Dalgleish)
