LONDON (Reuters) - Near-zero U.S. interest rates are too low and should make the Federal Reserve nervous, one of its top policymakers, Charles Plosser, said on Tuesday.
Plosser said in an interview with broadcaster CNBC that even though inflation was below the Fed’s preferred level of 2 percent, there was no reason to keep interest rates at current crisis-era levels, especially with U.S. unemployment now so low.
“That are many indicators that tell us rates are too low,” Plosser said. “We have been at zero for nearly six years and there is no precedent in history, even when inflation is too low, to have rates at zero when unemployment rates are as low as they are.
“We are really behaving in a way that is outside historical norms and that should make us nervous.”
Plosser, who is due to step down as Philadelphia Fed president next March, is among the minority of Fed officials who want to close the book on ultra-easy monetary policy sooner than mid-2015, which is when most of his colleagues see a rate rise.
He dissented against the Fed’s previous two policy decisions, but last month Plosser switched tracks and supported the decision despite a reference to rates staying low for a “considerable time.” His support, he said on Tuesday, was clinched by the addition of “a load of qualifying material” that more closely tied a rate hike to economic data.
Plosser also played down recent jitters in financial markets prompted by the prospect of a rate rise and the potential negative impact on the U.S. economy from a climb in the dollar.
“There could be some reverberations of a higher dollar on some companies, on the U.S. economy, but I think it is going to be relatively small,” Plosser said. “We shouldn’t be responding to every little wiggle of the financial markets.
“Our job is not to suppress dollar volatility, not to suppress the adjustment of asset prices. We need to keep our eyes focused on our longer-term objectives.”
Reporting by Marc Jones and Jamie McGeever; Editing by Catherine Evans and Chris Reese