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Philadelphia Federal Reserve Bank president Charles Plosser on increasing economic growth and job creation.
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The Federal Reserve's latest round of stimulus drawing plenty of criticism -- from within.
More of the Fed's regional bank presidents are voicing their opposition to the central bank's policy and Peter -- has an exclusive interview.
With Philadelphia fed president Charles Plosser Peter overview.
At thank you Melissa that's right we're here we're Charles Plosser of the Philadelphia federal reserve bank -- just finished up -- a speech that really.
That took I'll say it ripped in two.
Quantitative easing in additional.
Monetary accommodation.
President -- thanks for joining Fox Business once again thanks familiar you are concerned about risks that all of this could backfire -- so.
Well I mean I think every policy action has cost and benefits and I think one of the things that I've been trying to stress.
Is -- our efforts did he ever more accommodative to try to do something about.
Very disturbing unemployment rates is it's gonna have some cost to bear down the -- is taking some risks that I think we need to be cognizant.
And the risk -- gonna come later and I think we have to be very wary of those.
For example well I think that the the big exempt from me on buying assets is the size of our balance sheet and how.
The size the balance sheet is going to affect our ability unwind from all of this whenever that time may come we have to do that.
A little we find ourselves behind the curve we have to sell assets rapidly will be able to use the tools they we've developed.
An effective manner we -- not we underworld where we've never been before.
And so.
I think taking risks about the about what will happen at the end of this.
Is well worth thinking hard about and they're also concerned about potentially sowing the seeds for higher inflation down for all of us this current.
-- pop easy some money so one -- 101 of the more of the risk is higher inflation that is that we get to a situation where we have to begin tightening policy.
-- someday that will come to pass and -- -- will -- be sooner rather than later whatever.
When it comes time to do that.
Will we fall behind the curve and find ourselves in the situation where.
Inflation.
Is too far ahead of us and we'd lose.
The anchored expectations that rely so heavily on.
So expectations anchored until they're not.
And so this could -- I'm not forecasting it will do that but I think there's a risk that we have to understand that we are taking.
So then what is the proper policy prescription.
Going forward for you to help.
Get the economy.
Increase economic growth and increased job creation well I think they're there a couple of dimensions that questions.
One question is.
Can monetary policy do something about.
This program so I think you have to ask yourself.
Why are we going slowly what with the nature of the shocks and what is what is -- the economy back if you will.
And then ask yourself the question given that one of the appropriate policies -- that we might happen.
I happen to think that a lot of that we're told the company -- garden -- and certainly and certainly about the election that fiscal -- about Europe about growth in the economy.
And that is.
Further monetary policy action at this point -- he's not gonna ameliorate much of that uncertainty.
And so here I -- -- at the last meeting for patients.
We need to get through this fall get to the the drought and it certainly isn't the elections in the fiscal policy decision we have to address.
And see if that doesn't.
Take some of the shackles off the economy if you know.
And you would also favor tightening sooner rather than later right now that guidance is as the FOMC were not.
Does not plan to tighten.
Before mid 2015.
You wouldn't.
Favor.
Well I actually I certainly anticipate that yes we -- we'll have to tighten before -- particularly if my view of us.
How the economy and what's holding it back turns out to be accurate that if he really is about uncertainty about fiscal policies the elections in Europe and world worldwide growth.
Then if those ameliorate.
We're gonna have more growth going forward not a lot but more growth and now we will find ourselves had -- But that you don't feel then you don't.
You don't agree with some.
Yahoo! site and some empirical evidences showing that.
Quantitative easing has helped to lower interest rates it's reasonably substantially and thus helped.
To create you know an extra growth and GDP -- we heard our two million additional jobs from.
Different if you're exactly -- there's a there's a lot of empirical work that's been done on the effects of quantitative easing and asset purchases.
But those -- studies.
Take actions that -- -- a very different -- -- had QE1.
Which came at the height of the financial crisis where markets were dysfunctional.
Where liquidity was scares were trading wasn't taking place.
And to compare.
The effects of -- action.
And await known fine with what happens today.
When in fact markets aren't dysfunctional is not a liquidity problem.
You can't just apply the findings from QE1 -- think we're gonna get the same effects on interest rates today that we did in 2009.
Or in QE2 when we were trying to deal with the deflationary fears.
So I think these and to the environments difference we just can't take all that -- and and apply it.
Blindly I think as its -- diminishing returns and frankly.
While we have some evidence that interest rates decline we don't know that they were permits mom people argue transitory.
And we don't really directly observe the impact employment.
-- -- -- -- Economic indicators today that that I was talking to before we -- on camera because during your speech we got the release of consumer confidence for example was up substantially for the month of September.
In part non.
People feeling better about the job prospects about about -- hires stock prices.
This you know that the so called wealth effect would help make people feel -- wealthier and that's they would spend more.
What do you make of that and well -- -- act if it's consumer confidence -- up I guess generally that's a good thing that's used a good indicator of things to come.
But.
I think we have to be careful about reading too much into the entrails here of sort of what what actually caused that are not.
I do think we have to be careful I am not a big fan of talking about monetary policy.
And wealth effects that's not something that I find very useful because I worry particularly.
About the public becoming to believe that somehow the target.
And goal of monetary policy is to is it.
How the stock market -- to certain level of -- -- -- -- -- -- -- very dangerous place for monetary -- to be but we ought to be focusing -- -- our ability if we can.
To make the economy work more efficiently.
And improve welfare more generally by raising growth what and or reducing unemployment.
-- Charles Plosser thanks for joining us live portion of our broadcaster on Fox Business we are now.
Melissa and -- we're gonna go over now to the web site that foxbusiness.com.
And we're gonna continue our discussion in just.
-- little bit of a break cares to give people time to click over.
And that we're gonna drill down some more on president -- thoughts about the current state of the economy and and if I mention that.
Taylor rule in that part.
I lovely way ahead so we look back at -- Let -- general Peter -- thank you so much.
