NEW YORK – The Fed’s maximum employment and price stability mandates could face a short-term conflict, leading to “a balanced approach” to reach objectives, but Federal Reserve Bank of Philadelphia President and Chief Executive Officer Charles I. Plosser said Thursday, watching the Summary of Economic Projections might offer hints.
“Admittedly, this statement does not give much guidance as to how policy will be conducted, but I suggest that the public watch the assessments of the appropriate policy as viewed by policymakers in the SEP as an important source of information in this regard,” Plosser said at the Santa Barbara Economic Forecast Project according to prepared text released by the Fed.
The April Summary of Economic Projections “represented an upgrade in the near-term outlook compared to the January projections,” he added.
Plosser said he’s “slightly more optimistic” than most, predicting “inflation will hover near or slightly above 2%,” while unemployment will “continue to drift down gradually, reaching 7.8% by the end of this year and near 7% by the end of 2013.”
Again, Plosser pushed for better communication, but hailed recent Fed moves to increase transparency. “Having more information on the underlying paths should help the public better understand the projections. For example, they will have a better understanding of whether inflation is expected to return to the long-term goal as shocks work their way through the economy or whether policymakers anticipate that further monetary policy actions will be needed to achieve the Committee’s objective.”
Also, he said, as views evolve, “the public will be able to draw better inferences about the relation between current economic conditions, the economic outlook, and appropriate policy. This, then, informs the public about how policy is likely to react in the future to changes in the economy.”