Fed Pres Plosser, a voting member who was one of the 3 dissents on Bernanke’s decision to specify the time frame for ‘exceptionally low’ rates, is giving reason to why he did in an interview with Bloomberg radio. I am quoting directly from BN, “FOMC made ‘inappropriate decision’…he didn’t see need ‘to take further action’…’better part of wisdom was patience’ (finally a push back against ‘do something’ mentality and kowtowing to markets)…thought FOMC statement was ‘excessively negative’…policy should hinge on economy, not calendar (aka, mid 2013)…Fed will likely need to raise rates before mid 2013…he’s worried people expect too much from the Fed (the Fed single handedly created that dependency)…’we’re reacting too quickly here’…’there is a price to be paid’ on monetary policy (booms, busts, misallocation of capital/malinvestment and inflation)…inflation is much higher than this time 2010 (before infamous Jackson Hole speech) and the Fed needs to be responsible for headline inflation and he’s unsure whether Fed can stay in front of inflation (deeper they get with easing, the harder to reverse).” Parentheses mine.
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