PHILADELPHIA A top U.S. central banker on Friday praised last month's positive jobs growth, saying it was reflective of a stable rate of expansion over the last several months and that he hoped it would spur the Federal Reserve to trim its policy support.
Charles Plosser, the hawkish president of the Philadelphia Fed, said the November payrolls data released earlier on Friday reinforced his view that the central bank should begin to wind down its accommodative bond-buying program.
Talking to reporters on the sidelines of a conference here, he suggested the Fed should simply set a dollar cap on the asset purchases, and to give it an explicit expiry date.
The U.S. unemployment rate dropped to a five-year low of 7 percent last month and nonfarm payrolls expanded by a better-than-expected 203,000 jobs.
The report stoked investor speculation that the Fed could trim its $85-billion monthly quantitative easing (QE) program sooner than expected, possibly in December or January.
"Clearly (it) was a positive sign," Plosser said, noting the key labor force participation rate had ticked up. "If you look back over the last six months, it's been pretty steady progress, even improving somewhat."
Frustrated with the slow U.S. recovery from the 2007-2009 recession, the Fed has kept interest rates near zero for five years and is 15 months into its third round of QE, which is meant to encourage investment, hiring and economic growth.
It has said it will buy bonds until the labor market is on a sustainable path to recovery. Joblessness has steadily declined after hitting 10 percent in 2009.
Plosser, a long-time critic of QE, urged his colleagues at the Fed to agree to cap the amount of bonds that would be purchased, and to set an end date for the program, to better telegraph policy to financial markets. The first two rounds of quantitative easing were set up like this.
"Say, we're going to stop them," Plosser said of the purchases. "We're going to buy at this pace until we've bought that amount, and then we'll stop, just like we did with QE2.
"The sooner we can end this thing the better," he said.
To reinforce the idea that policy will stay easy well after QE is wound down, the Fed has said it will keep rates near zero at least until unemployment falls to 6.5 percent, as long as inflation expectations don't rise beyond 2.5 percent.
Plosser said he would prefer to change the so-called thresholds to more predictable "triggers," to give investors more insight into future policy and to burnish the Fed's credibility.
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)