An economic recovery will start in the last half of 2009, after declines this quarter and next and weak growth in the first half of the new year, with the jobless rate hitting 7%, according to Federal Reserve Bank of Philadelphia president and chief executive officer Charles I. Plosser.
“The decline in energy and commodity prices in recent months has reduced my own concern about rising inflation expectations — at least in the near term,” Plosser said yesterday before the Economics Club of Pittsburgh, according to a prepared text released by the Fed.
“This is good news, but it does not mean we should be complacent or ignore our responsibility to maintain price stability,” he said. “Our current policy is injecting large amounts of liquidity into the economy. Unless we withdraw that liquidity in a timely fashion, it could fuel renewed inflationary pressures down the road.”
Noting that “significant financial stress” remains, making the economic outlook “highly uncertain,” Plosser said foreign central banks and governments took action to help alleviate some of the financial pressures, but it will be “some time before financial markets return to some sense of normalcy.”
