* Hawkish official downplays drop in U.S. workforce
* Prefers a quicker-than-planned withdrawal of bond-buying
By Jonathan Spicer
PHILADELPHIA, Jan 14 Predicting more economic
growth and a further drop in U.S. unemployment this year, a top
U.S. central banker said on Tuesday he would prefer a
quicker-than-planned withdrawal of policy stimulus.
Philadelphia Fed President Charles Plosser, whose hawkish
views are well known at the Federal Reserve, downplayed a weak
December jobs report and rebuffed concerns some of his
colleagues have voiced over so many Americans having dropped out
of the work force.
"As we enter 2014, I think the bottom line is that the
economy is on a firmer footing than it has been for the past
several years," he told a luncheon at the ornate Union League of
Philadelphia building in downtown Philadelphia.
Plosser, who votes on U.S. central bank's monetary policy
committee this year under a rotating system, predicted
joblessness would fall to 6.2 percent by year end, from 6.7
percent last month.
He repeated expectations that inflation, while low at 1
percent now, will rise toward the Fed's 2-percent goal through
the year, and he reiterated a forecast of 3-percent gross
domestic product growth.
While the Fed this month trimmed its bond-buying to $75
billion per month from $85 billion, in a nod to a better labor
market, Fed Chairman Ben Bernanke has said the program would
likely be wound down in cautious, measured steps and probably
shelved altogether by year end.
"My preference would be that we conclude the purchases
sooner than this," Plosser said, "but I am glad that we have
taken the first step on the path to ending the program."
Excessively low inflation and excessively high unemployment
have prompted the Fed's very easy policies, including near-zero
interest rates, now five years after the end of the Great
Policymakers such as Eric Rosengren, the dovish head of the
Boston Fed, have warned against removing the stimulus too
hastily because it could permanently damage the labor market.
The percentage of Americans who have dropped out of the work
force is at multi-decade highs.
Fed Vice Chair Janet Yellen, who is set to succeed Bernanke
on Feb. 1, said in November: "We have all too many people who
appear to have dropped out of the labor force."
But economists at the Philadelphia Fed published a paper
late last year that suggested the drop in participation is
largely the result of retiring baby boomers, a relatively benign
conclusion for the U.S. economy.
"The declines are driven mostly by demographic changes,
including the aging of the baby boomers," said Plosser, adding
the labor force participation rate has been dropping since 2000
and "was expected to accelerate."
He added: "Much of the decline in participation since the
start of the recovery can be accounted for by increased
retirements and disability."