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Charles Plosser, head of the Philadelphia Fed,
said rates may begin to rise "sooner than previously
anticipated" and called on the central bank to promptly adjust
its formal policy guidance to acknowledge "significant progress"
in both U.S. inflation and employment.
Plosser is among the minority of Fed officials who want to close
the book on ultra easy monetary policy sooner than mid-2015,
which is when most of his colleagues see a rate rise. Fears of a
global economic downturn and a volatile selloff in stocks in
recent days have, however, prompted investors to bet on a later
tightening closer to the end of next year.
Plosser's prepared remarks to an economic development group did
not address that.
The Fed must "prepare the markets for the fact that interest
rates may begin to increase sooner than previously anticipated,"
said Plosser, who dissented on the central bank's last two
policy decisions, and who will step down on March 1.
"I'm not suggesting a rate increase now, but changing the
forward guidance would at least afford us the flexibility to
gradually raise rates beginning earlier than currently
anticipated," he said, adding rates should rise in the "very
near future".
The Fed has kept rates near zero since late 2008 and has bought
trillions of dollars in bonds to spur recovery from recession.
U.S. economic growth has been erratic but unemployment has
fallen briskly to 5.9 percent last month.
Plosser repeated he expects about 3-percent GDP growth the rest
of this year and next, before it settles to a trend around 2.4
percent.
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)
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