Philly Fed Plosser Also Warns of Rate Hikes Sooner Than Expected

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percent sign buttonCharles Plosser, President and Chief Executive Officer of the Federal Reserve Bank of Philadelphia, was speaking on Tuesday regarding his economic outlook and housing in front of the Women in Housing & Finance meeting in Washington, D.C. While much of the outlook is positive, we cannot stress enough that this is yet another soft call for the rate hikes to begin sooner rather than later.

Plosser gave his views on the sustainable improvement in housing in the context of a broader economic recovery, and guidance is that he is optimistic about the housing recovery. He believes that even though sales have leveled off recently. He said that house prices were still rising and that the fundamentals remain sound, including stronger household formation, solid job growth and consumers with stronger balance sheets.

Here is where the hawkish bias comes into play. Plosser said thinks that the U.S. economy is on firmer footing today than it has been in several years, and he expects continued progress in 2014.

And even more on the predicting faster rate hikes (and more tapering): Plosser believes reducing the pace of asset purchases in measured steps is moving in the right direction, but the time may come sooner than many expect when interest rates may have to rise if the Fed wants to avoid falling behind the curve.

Plosser said about his outlook for 2014:

Thus, I continue to believe that the U.S. economy is on a firmer footing today than it has been in several years. This is a cause for some optimism for continued progress in 2014. My forecast has been for growth of about 3 percent in 2014, and while the weather-related softness in the first quarter may temper this full-year outlook somewhat, it
hasn't led me to downgrade my outlook for the remainder of the year.

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