Federal Reserve Bank of Philadelphia president Charles Plosser said Wednesday that the U.S. economy is recovering modestly and that improvement should continue, despite the “summer doldrums” of the past few months.
“I do not support further asset purchases of any size at this time,” he said in text released by the Fed.
Plosser said monetary policy can neither fine-tune employment nor solve geographic, sectoral, or skill mismatches between openings and jobseekers.
“It is difficult in my view to see how additional asset purchases by the Fed, even if they move interest rates on long-term bonds down by 10 or 20 basis points, will have much impact on the near-term outlook for employment,” he said.
“Sending a signal that monetary policymakers are taking actions in an attempt to directly affect the near-term path of the unemployment rate, and then for those actions to have no demonstrable effects, would hurt the Fed’s credibility and possibly erode the effectiveness of our future actions to ensure price stability.”
Plosser said it may convince the public the Fed is seeking to monetize the deficit, making accommodation removal harder.
