NEW YORK May 8 The Federal Reserve should adopt
a more systematic approach to policy-making, a top Fed official
said on Thursday, repeating his call for less discretion and
more clearly articulated rules for decisions such as when to
raise interest rates.
Charles Plosser, president of the Philadelphia Fed and a
voter on U.S. monetary policy this year, suggested that a
reasonable place to start would be an existing economic model
housed at the central bank known as FRB/US.
Moving to "rule-based behavior" would reduce uncertainty
over Fed policy in financial markets and clarify matters for the
public, said Plosser, whose hawkish views often run against the
thinking of Chair Janet Yellen and the Fed's core policymakers.
"Systematic policies that provide important information
about the policymakers' reaction function combined with other
information, such as the policymakers' economic forecasts, can
sharpen forward guidance in a way that reduces policy
uncertainty and enhances economic performance," Plosser said in
prepared remarks for delivery to the Council on Foreign
Plosser gave a similar speech in March. On Thursday he did
not comment on when he expects rates to rise, and he did not
discuss economic conditions.
While the U.S. central bank has used "forward guidance"
since the 2008 financial crisis to telegraph how long it planned
to keep rates near zero, it has always retained latitude on
The Fed's latest statement lists a variety of broad factors
it is monitoring -- including inflation, the labor market and
financial developments -- as it determines when to finally raise
rates after more than five years near zero. In an example of the
discretion it employs, the Fed says it doesn't expect to raise
rates for a "considerable time" after it stops buying bonds.
Fed economists have used the FRB/US model since 1996 to run
simulations of the performance of the economy under a range of
assumptions on everything from inflation to rates to growth.
(Reporting by Jonathan Spicer and Richard Leong; Editing by