Last week, the Federal Open Market Committee held the Fed Funds Rate at its current level and indicated that the economy is expanding at an acceptable pace. This morning, however, a Federal Reserve Bank President delivered a public speech to the contrary.
In prepared remarks to the local Chamber of Commerce, Philadelphia Federal Reserve Bank President Charles Plosser warned, "My own assessment is that with growth prospects of the economy improving, there is some risk that we may not see a return to price stability unless monetary conditions are further tightened."
Don’t be confused that a Fed member speaks out against the Fed policy; this is normal behavior. When the FOMC meets eight times annually, their goal is to discuss economic conditions and then vote on monetary policy. Just like a corporation, when management makes a decision, it is considered to be a "consensus" decision — even if several people involved in the decision dissented.
Plosser is not a voting member of the FOMC, the group within the Federal Reserve that determines the Fed Funds Rate.
