JACKSON HOLE Wyo. (Reuters) - The Federal Reserve is “mired” in debate over corners of the U.S. labor market that it has little chance of improving, and it should instead prepare the public for an interest-rate rise, a Fed official known for his hawkish views said on Friday.
Charles Plosser, president of the Philadelphia Fed, said in an interview that it was better to tighten monetary policy too soon rather than too late. To get on course to tighten policy, he said, the U.S. central bank must first acknowledge that it can’t fix things at the margins of a labor market that is otherwise looking much better.
Part-time employment, for example, is at the margins of the labor market.
“We’ve got ourselves tied up in a very difficult problem because we focused so much on employment,” said Plosser, who dissented from the Fed’s last policy statement.
“How do we declare success when we don’t know what we’re measuring, we don’t know how to measure it, and even if we could measure it we’re not sure what effect we have on some of these things?” he said.
He spoke to Reuters on the sidelines of the annual central banking conference in Jackson Hole, Wyoming, where earlier on Friday Fed Chair Janet Yellen argued there was still room for the labor market to improve.
The Fed, in a pledge that started under Yellen’s predecessor, Ben Bernanke, has been tying an eventual rate hike to sustained improvement in the labor market.
Reporting by Jonathan Spicer; Editing by Leslie Adler