Tough winter makes economic assessment hard: Fed's Plosser

Tue Feb 11, 2014 11:51am EST
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By Daniel Bases

NEWARK, Delaware (Reuters) - Assessing the U.S. economy's underlying economic trends has become more difficult because of record low temperatures and heavy snowfall across much of the nation, Federal Reserve Bank of Philadelphia President Charles Plosser said on Tuesday.

"I suspect it may be another couple of months before we have a better read on the economy," Plosser said in a speech at the University of Delaware. He characterized the weather as "unusually disruptive."

On Friday the January U.S. jobs report showed a smaller-than-expected increase of 113,000 in the number of newly created non-farm jobs versus the Reuters consensus estimate of 185,000. The unemployment rate dipped to 6.6 percent, a five-year low..

Plosser, in comments to reporters, said the data was now "noisier than usual," and therefore would take the latest round of economic data with "a grain of salt until we get some more information and presumably get a better read."

Plosser, a voting member of the U.S. central bank's monetary policy committee this year, reiterated his stance that the Fed should move faster in winding down its bond purchasing program. He called the purchases, known as quantitative easing, "neither helpful nor essential."

He expressed some surprise that inflation has remained well below the Fed's stated 2 percent target given all of the quantitative easing, but so far he's not overly concerned.

"We have done over $1 trillion of QE since a year-ago September and inflation rates have come down. If you are worried about inflation being too low it is not at all obvious the right answer is more QE," he said.

Plosser reiterated that even with January's disappointing jobs report there has been significant improvement in labor market conditions, to the point where the criteria for ending asset purchases has been met.   Continued...

Philadelphia Federal Reserve President Charles Plosser speaks at an Economics21 event in New York, March 25, 2011. REUTERS/Brendan McDermid