Fed's Plosser Maintains Skepticism Re QE Impact on Labor Market

WASHINGTON — Philadelphia Federal Reserve Bank President Charles Plosser Thursday maintained his skepticism that the Federal Reserve's $85 billion a month in bond purchases is having a material effect in alleviating the country's jobs crisis.

"It's transmission into the labor market has been much more dubious," he said in an interview on Bloomberg TV.

Rather, the risks associated the Fed's unconventional policies "are high," he warned. Plosser is not a voter on the policy-setting Federal Open Market Committee this year.

"When I've weighed the costs and benefits of this policy, I've decided that the costs outweigh the benefits," Plosser warned.

"I would particularly like to see us begin to slow the pace down, gradually ease ourselves out of this - if we possibly can," he said.

He said the Fed's needs to exercise more humility, cautioning that it is "dangerous" to think monetary policy has the solution to everything.

Factors outside the Fed's control - such as demographics and technology - are at play in the labor market, he said, and it is in a transition process that will be slow.

"We've dug ourselves a very large hole here," Plosser said, and the key will be "climbing our way out and how that is going to play out when there are so many things that may be beyond our control," he said.

Plosser assured, however, that when the time comes to withdraw the massive amounts of monetary stimulus the Fed has pumped into the economy, "it's pretty clear that we know and have the tools."

"The question is will we be able to execute them, and will the markets be patient enough with us to be able to do it in a smooth way," he added.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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