A high-ranking Federal Reserve official told a Johnstown audience he thinks the economy can grow at around 3 percent and nationwide unemployment can drop to 6.25 percent in 2014.
Charles Plosser, president and CEO of the Fed’s Philadelphia bank, provided his projection during a Greater Johnstown/Cambria County Chamber of Commerce-sponsored luncheon held inside the Pasquerilla Conference Center on Tuesday afternoon. He also estimated a growth of 2.5 percent for this year.
“Even 3 percent is far from a robust growth that many would like to see, but uncertainties loom large on the horizon,” said Plosser. “Nevertheless, 3 percent for 2014 would represent steady progress and an improving economy.”
Along with making his prognostication, Plosser expressed disappointment that the Federal Open Market Committee did not recently begin to reduce the pace of its asset purchasing program. The Fed currently buys $45 billion of longer-term Treasury securities and $40 billion of agency mortgage-backed securities every month. The reserve indicated in June that, if certain labor market, growth and inflation targets were met, a reduction of purchases would begin. Although projections were revised slightly downward, Plosser felt the differences were so economically insignificant that the slow-down in buying should have started in September.
“In my perspective, to delay tapering of our current asset-purchase scheme, without clear significant departures from our prior guidelines, suggested the FOMC was changing the goalposts and deviating from our forward guidance that we offered in June,” said the CEO. “In my view, this undermines the credibility of the committee and reduces the effectiveness with which we can provide forward guidance. It also contributes to additional uncertainty – policy uncertainty – regarding the future course of monetary policy.”
Plosser touched on a variety of other subjects during his presentation, question-and-answer period and ensuing press conference.
He addressed the federal government’s handling of the economy by saying, “I think it’s hard to not be disappointed with the dysfunction in Washington over fiscal policy.”
Plosser also talked about the differences between monetary policy concerns in small towns, such as Johnstown, and major financial markets.
“The concerns are real in these communities,” he said. “One of the things that I try to do is try to provide some big-picture perspective to the audiences about trying to understand what’s going on, why it’s happening and add some perspective to that. It’s actually important because hearing what their concerns are is important information in how I think about policy and how I think about the economy and what it looks like. I find the interactions very valuable.”
Dave Sutor is a reporter for The Tribune-Democrat. Follow him on Twitter at twitter.com/Dave_Sutor.