(Corrects Q3 GDP growth to 3.1 percent in 6th paragraph)
By Jonathan Spicer
SOMERSET, N.J. Jan 11 The Federal Reserve's
aggressive policy accommodation may be frustrating Americans'
efforts to restore their personal wealth and may actually slow a
broader rebound in U.S. consumption, a top official at the U.S.
central bank said on Friday.
Philadelphia Fed President Charles Plosser, an outspoken
critic of the bank's prolonged near-zero interest rate policies,
outlined the ways those policies may be undercutting the very
U.S. economic recovery they are meant to encourage.
"Efforts to drive real rates more negative or promises to
keep rates low for a long time may have frustrated households'
efforts to rebuild their balance sheets without stimulating
aggregate demand or consumption," Plosser, who does not have a
vote on Fed policy this year, told a meeting of the New Jersey
Now more than three years after the recession ended,
households will nonetheless take time to restore wealth to a
comfortable level, Plosser added, "and attempts to increase
economic 'stimulus' may not help speed up the process and may
actually prolong it."
Among a minority of so-called hawks at the central bank,
Plosser also largely repeated predictions for a pick-up in U.S.
economic growth to about 3 percent this year and in 2014. He
also expects unemployment to fall to near 7 percent by the end
of 2013, from 7.8 percent last month.
The U.S. economy grew at a decent 3.1 percent annual rate in
the third quarter but growth is expected to have slowed in the
final months of the year. Last month, Fed policymakers said they
expected GDP growth of between 2.3 to 3.0 percent this year, and
3.0 to 3.5 percent in 2014.
At that same December meeting, the Fed ramped up asset
purchases that are meant to spur growth and pledged to keep
rates near zero until the unemployment rate drops to 6.5
percent, as long as inflation expectations don't climb above 2.5
Plosser characterized the pace of U.S. economic growth as
"moderate," and predicted that fourth-quarter growth was likely
near 2 percent.
U.S. retail sales have been sluggish, rising 0.3 percent in
November after a drop of 0.3 percent the month before.
Turning to the U.S. fiscal situation, the policymaker said
the lingering uncertainty over government spending and taxes is
weighing on business hiring. The Fed is probably not helping on
this front, either, Plosser said.
"Here, too, in my view, monetary policy accommodation that
lowers interest rates is unlikely to stimulate firms to hire and
invest until a significant amount of the uncertainty has been
resolved," he said.
Facing the so-called fiscal cliff, U.S. lawmakers on Jan. 1
struck a partial deal that avoids the worst of the planned tax
rises but put off big decisions on spending cuts for two more
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama and