Dissenting Federal Reserve Board member Charles I. Plosser, president and CEO of the Federal Reserve Bank of Philadelphia, in a speech Monday renewed his longstanding opposition to Fed policy moves aimed at putting downward pressure on rates for mortgages and other funding.
“I was not supportive of the most recent decision to extend the time frame for exceptionally low rates through 2014,” he said at a Main Line Chamber of Commerce event in Gladwyne, Pa. “In my view, economic conditions have modestly improved since our December meeting, especially on the employment front, and the downside risk of a double-dip recession that many feared in September when the Committee instituted ‘Operation Twist' has substantially abated. Thus, with the economy gradually improving, I saw little justification to further ease monetary policy and felt it risked undermining confidence in the process.”
Plosser said he expects to see housing stabilize this year but not improve much. He added that he believes it should not ever return to the level it was at just prior to recent downturn.
“Even as the economy rebalances, we should not seek nor should we expect housing and related sectors to return to those pre-recession highs,” he said. “Those exuberant days were simply not sustainable, and it would be a mistake to retain that standard as our benchmark for recovery.
“The housing crash destroyed a great deal of wealth for the average consumer and the economy as a whole. The losses are real and the consequences severe for many individuals and many businesses. Moreover, the losses cannot be papered over with monetary policy.”
