Skip to comments.Fed's Plosser at odds with policy approach favored by Yellen
Posted on 01/05/2014 4:15:54 PM PST by BenLurkin
"Measures that arbitrarily, or by assumption, assign the bulk of fluctuation in GDP to purely temporary factors may provide poor policy guidance when shocks are more permanent in nature," he said in prepared remarks to the Korea-America Economic Association.
While gross domestic product growth rose above 4 percent in the third quarter, it has generally stayed closer to 2 percent since the recession ended in 2009, causing some to think that longer-term potential GDP growth is no longer the 3-percent rate to which Americans are accustomed.
If that is the case, the Fed's ultra easy policy stance - including promises to keep rates near zero for a while in order to drive down joblessness - may be misdirected.
"The shock that hit the economy appears to have had very persistent, if not permanent, effects," Plosser said. "From a statistical perspective, the economy appears to have taken a permanent hit to the output level."
(Excerpt) Read more at cnbc.com ...