Federal Reserve Bank of Philadelphia President Charles Plosser indicated that further interest rate reductions may be needed to stimulate the U.S. economy, should economic growth become "substantially weaker" than already projected, Bloomberg News reported Tuesday.
"A substantially weaker outlook than expected, particularly if that weakness is projected to be more prolonged than anticipated, may require further adjustments to policy,'' Plosser said in a speech in Gladwyne, Pennsylvania, adding that he already expects several ``sluggish'' quarters of growth, Bloomberg News reported.
However, Plosser also told Reuters that he's "concerned that developments on the inflation front will make the Fed's policy decisions more difficult in 2008."
The Fed's preferred measure of consumer prices has risen 2.2% on a November 2006-November 2007 basis, or at a rate above the Fed's comfort zone, leading many economists to argue that the Fed may not be as stimulative as it typically would be at this stage of the economic cycle. The Fed may also continue to use non-interest rate policy options to encourage economic activity, these economists say.
"A substantially weaker outlook than expected, particularly if that weakness is projected to be more prolonged than anticipated, may require further adjustments to policy,'' Plosser said in a speech in Gladwyne, Pennsylvania, adding that he already expects several ``sluggish'' quarters of growth, Bloomberg News reported.
However, Plosser also told Reuters that he's "concerned that developments on the inflation front will make the Fed's policy decisions more difficult in 2008."
The Fed's preferred measure of consumer prices has risen 2.2% on a November 2006-November 2007 basis, or at a rate above the Fed's comfort zone, leading many economists to argue that the Fed may not be as stimulative as it typically would be at this stage of the economic cycle. The Fed may also continue to use non-interest rate policy options to encourage economic activity, these economists say.
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