Fed’s Plosser Says Stimulus May Backfire, Fuel Inflation

Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank’s record stimulus risks a surge in inflation and may impair efforts by households to repair their finances.

Plosser's comments:

“Attempts to increase economic ‘stimulus’ may not help speed up the process and may actually prolong it”

“Monetary policy accommodation that lowers interest rates is unlikely to stimulate firms to hire and invest until a significant amount of the uncertainty has been resolved”

"The Fed is looking for evidence of distortions in financial markets that may stem from a lengthy period of low interest rates and asset purchases."

"Businesses need to be alert to accumulating too much risk from a potential rise in interest rates over time."

…favors halting additional bond purchases because their benefits are “pretty meager” and “there are lots of risks” including disruptions in the economy.

"The more of these assets we have, the more complicated the exit strategy will be”

(Bloomberg; Jan 11, 2013 S. Matthews and C. Salas Gage)