WASHINGTON — Federal Reserve Bank of Philadelphia president Charles Plosser Friday once again took aim, albeit indirectly, at the manner of the Fed's forward guidance regarding future monetary policy, arguing that they will not have the desired effect if the public believes the central bank's commitment is "incomplete."
Plosser also warned of the moral hazard that occurs when a central bank has no credibility, as it may induce excessive risk-taking.
In remarks that focused on macro models and monetary policy analysis, Plosser did not comment on current economic or monetary conditions.
The Fed's steering body, the Federal Open Market Committee, has said economic conditions will require short-term interest rates remaining exceptionally low until late 2014.
Plosser has always taken issue with the use of a calendar date, cautioning that it backs the Fed into a corner and places the central bank's credibility at risk.
He noted in his speech that zero lower bound policies rely on policymakers "guiding" expectations of when an initial interest rate increase will occur in the future.
