Federal Reserve Bank of Philadelphia President Charles Plosser forecast U.S. economic growth of about 3 percent for this year and next, saying he’s more sanguine about the outlook than many other U.S. policy makers.
“My own views place me in the slightly more optimistic camp,” Plosser said today in the text of remarks given in Santa Barbara, California. He predicted inflation “near or slightly above 2 percent,” and said his “optimism is most evident” in his forecast that the unemployment rate will decline to 7.8 percent by the end of this year from 8.2 percent in March. Joblessness will fall to “near” 7 percent in 2013, he said.
The odds of more Fed stimulus diminished this week as four central bankers, including Plosser, said such action probably won’t be needed and U.S. manufacturing showed unexpected strength. The Federal Open Market Committee left policy unchanged after its April 24-25 meeting, and Chairman Ben S. Bernanke signaled that further easing is unlikely unless the economy deteriorates.
The FOMC repeated last month that borrowing costs will probably remain “exceptionally low” at least through late 2014. Fed officials raised their projections for the economic expansion at the April meeting, forecasting growth of 2.4 percent to 2.9 percent this year, up from a January prediction of 2.2 percent to 2.7 percent. They also lowered their forecast for unemployment to 7.8 percent to 8 percent this year, down from a January projection of 8.2 percent to 8.5 percent.
“It is fair to say that the projections in April represented an upgrade in the near-term outlook compared to the January projections,” Plosser said.
The Philadelphia Fed chief reiterated his view that the Fed should “provide information about the factors that will influence its policy decisions,” and voiced his support for the central bank’s adoption of an inflation target and the release of policy makers’ appropriate paths for interest rates.
“While we cannot predict the future, we can and should clearly communicate our objectives and how we are likely to react to future events,” Plosser said.
“Clarity and transparency are important for achieving our objectives, and I believe that the committee will continue on this journey as it seeks to improve the clarity and effectiveness of its communications,” he said.
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