Fed President Says Inflation to Increase…
Federal Reserve Bank of Philadelphia President Charles Plosser said prices may rise 2.5 percent in 2011, a rate well above central bankers’ preferred range, and cautioned against complacency on inflation. “The economy may be at greater risk of inflation than the conventional wisdom indicates,” Plosser said in a speech yesterday in New York. “While inflation expectations appear to remain anchored, we should not become sanguine about our credibility. It can be easily lost.”
The bank president’s inflation forecast for 2011 exceeds central bank officials’ long-run preferred range of 1.7 percent to 2 percent, and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.
Fed officials will need to raise the U.S. benchmark interest rate and reduce the central bank’s balance sheet when financial and housing markets improve, Plosser said. The Federal Open Market Committee is committed to price stability and will act in a “prompt way” to ensure it, he said.
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