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Federal Reserve Bank of Philadelphia President Charles Plosser on why the economy would have to deteriorate significantly before he would support furt...
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-- it is no secret that the debate over just what the US economy needs in the short and long term is hotly widely contested.
Peter Barnes is in Washington he is taking us directly to an influential figure.
Who has got a few things to say about monetary policy and much much more picture.
That's right sure we're joined now by a Charlie Plosser Charles Plosser who is the president of the Federal Reserve Bank of Philadelphia he is not a voting member of the FOMC right now.
But he's always in the road where there is voting or not so we want to hear his views on the economy and let's start off with this Friday -- jobs report Charlie.
That's spooked a lot of people it was -- it as strong it was weaker than expected and and it has some.
Folks concerned whether or not that the job creation is stalling out -- the economic recovery is stalling out.
What do you make.
I didn't make that much out -- it was a little bit those little bit of moderate I called a moderate report what as strong as the last three months but you know we've never been blessed and we had four.
Jobless job.
Payroll months over 200000 was in 1999 so it's been awhile since -- -- would have been -- -- some kind of record we had another excess of 200000.
Us.
Nonetheless it was a little disappointing but I don't think it means very much remember these numbers get revised periodically and and next month will get a revision of this number so I think was still pretty good.
And these numbers -- around so it hasn't really changed the way I'm looking at the economy fundamentally.
Has -- and then it has changed the way you might look at policy response at the epithet now.
Not not -- not this well.
He hasn't changed my view policy in my view of how the economies following -- at this point what would change your view.
There's a lot of talk about.
More quantitative easing QE3.
Maybe continuing Operation Twist which is under way right now what what conditions would.
Would.
You required to for example.
Vote for if you -- voting for additional.
Policy.
-- you become you have to deteriorates significantly before from four I would sort of think about doing more easing of -- kinda think that the economies generally improving.
Compared to when we did QE2 we have to remember that -- the inflation rate was only 1%.
Unemployment was close to ten.
And and we indicated we did some easing and now unemployment -- of eight point two inflation's over to.
It doesn't necessarily suggest to me that additional easing at this point is really call for.
What's your outlook for the economy right now what do you see GDP for the year where do you see unemployment rate going.
What I have a forecast that calls for 2012.
And 2013 to have.
GDP growth of about 3%.
-- give or take a little bit but that's my forecast big unemployment rates gonna continue to creep down slowly.
It's going to be a slow slog out of there -- a very deep recession.
But it's gonna continue to improve I think we'll keep inflation under control at least for this year and probably next.
Although I think there the risk for me inflation down the road sometime in the economies -- -- begins to pick up.
Then I think we could have some challenges.
As we try to exit from from this from this period of excessive and great accommodation.
Wanna get back to that but to staying on the pulse on the economy right now.
What keeps you up at night high gas prices the situation in Europe.
Well I think those are two very important items right now keep -- -- -- half.
And and I think -- gas prices in general of -- rise in oil prices in general has been has been of concern.
It certainly has its effects a lot are not convinced at this point.
That it's going to derail the recovery in some sense and let's say really trended up a lot higher from where they are now.
Europe still is a concern.
I'm not quite as worried about Europe as I was say in the fall.
-- a little more comfortable that they're gonna work their way through their challenges but there's still risk out there and they and how deep their recession might be.
Or -- the financials will play out and how disruptive that might be -- -- risk but I think they're mitigated from where they were safe for months ago.
You're here in town because you give them a policy speech today on more transparency.
At the Fed.
You announced some new proposals for more transparency more clarity and thirty seconds ahead.
What what are they have well I think it's very important that the public understand how the -- thinks about conducting monetary policy.
-- what we react to.
How our policy decisions -- Determined by how the economy evolves.
And the more we can be clear about that the better the public in the markets will understand.
What to expect from us how will we react to events going forward.
And when we reduce the uncertainty about how monetary policy.
We reduce volatility in the economy certainly in the markets.
And we had we didn't -- stability for the economy more broadly so I think it's very important that we try to be more transparent and clear about how we're gonna go back and -- Specifically you would like to see the if the Fed disclose.
What kind changes in economic.
Initiator conditions might trigger a certain.
Policy response edit.
A certain time or at least give people a better idea of how you would respond and what I.
We can do that we can be descriptive about that but that's exactly what we want to be able to what conditions would have to exist or how would the economy have to -- -- Before we would take some kind of step for action.
And it's it's actually not as hard as it sounds to do that but but it would be a big step forward for improving the clarity of people understanding what we -- do.
Actually would look at things like the GDP rate -- -- that's how that's moving the unemployment rate or the inflation were exactly and say hey folks you know.
We're watching those and if they get out -- line we might angrily.
-- we can say we think GDP is doing this and it's gonna do data and we think unemployment doing this and it's going to do that -- doing that and because of that.
We decided to either tighten policy and loosen policy.
But it's because those things have changed -- somewhere in the -- we can.
Be clear about that and signals and signal -- an advanced -- people understand -- that they're not gonna do this now because these things didn't change.
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