U.S. Fed official warns interest rates could rise sooner than expected

Washington (July 11)  Federal Reserve Bank of Philadelphia President Charles Plosser said the Fed risks losing credibility by waiting too long to raise interest rates, and economic data are already pointing to a need to tighten.

“We are closer than a lot of people might think,” Mr. Plosser said Friday on Bloomberg Television. If the Fed waits too long, “We’ll lose credibility. We may lose control of inflation.”

Fed officials are approaching their goals for full employment and price stability faster than they had forecast, forcing them to consider accelerating their first rate increase since 2006. St. Louis Fed President James Bullard warned this week that inflation will rise above the Fed’s target late next year.

“Monetary policy ought to be reacting to the data,” Mr. Plosser said. “We are on a path that says low for long and we have no plans to raise interest rates anytime soon, yet as the data keeps telling us, we ought to be raising rates.”

Source:  FinancialPost