AMELIA ISLAND Fla. (Reuters) - Philadelphia Federal Reserve Bank President Charles Plosser, the loan dissenter at the Fed's July policy meeting, on Saturday continued his push for the U.S. central bank to change its language on monetary policy to reflect an improving economy and pave the way for a sooner-than-expected interest rate hike.
Plosser, who is known for his longstanding warnings about potential inflation risks, said his dissent has given voice to others on the Fed's policymaking committee who feel the central bank's steady, accommodative language had fallen out of step with a strengthening U.S. economy.
"I was not the only one that was becoming uncomfortable with this language," Plosser said. "My dissent served as the voice of that criticism."
The Fed's policy committee next meets later this month in a session that may see Plosser's call for change to the Fed's guidance satisfied. In a recent speech at the Fed's annual economic conference in Jackson Hole, Wyoming, Fed Chair Janet Yellen acknowledged the arguments of those, like Plosser, who feel the economy may be stronger than expected.
Other policymakers have also said they expect the central bank's policy stance to begin shifting soon.
"We must acknowledge and thus prepare the markets for the fact that interest rates may begin to increase sooner than previously anticipated," Plosser said in remarks delivered to a group of Pennsylvania community bankers gathered for their annual convention at this seaside resort.
"I am not suggesting that rates should necessarily be increased now," said Plosser, who currently is a voter on the Fed's main policy-setting committee. But he added "our first task is to change the language in a way that allows for liftoff sooner than many now anticipate and sooner than suggested by our current guidance."
On other issues, Plosser said he had doubts about proposed legislation on Capitol Hill that would force the Fed to adopt a rule in setting interest rates. Though he favors such a rule, he feels the Fed should come to that policy on its own.
The data the Fed is examining in its policy debate remains ambiguous: growth has rebounded, for example, but the jobs report for August released on Friday was a disappointment and offered fodder for policymakers who feel U.S. labor markets are not fully healed.
U.S. employers hired the fewest number of workers in eight months in August and more Americans gave up the hunt for jobs, providing a cautious Fed with more reasons to wait longer before raising interest rates.
But Plosser said it was difficult for economists to know the true state of the labor market, and dangerous for the Fed to weigh employment issues too heavily in its rate decisions.
"Whether you believe that the labor market has fully recovered or not, it is clear that we have made considerable progress toward full employment and price stability," he said. "We are no longer in the depths of a financial crisis nor is the labor market in the same dire straits it was five years ago."
"If monetary policy waits until it is certain that the labor market has fully recovered before beginning to raise rates, policy will be far behind the curve," he said.
Reporting by Howard Schneider; editing by G Crosse, Leslie Adler