Philly Fed’s Plosser offers perspective on economic outlook

President of Philadelphia Federal Reserve notes “somewhat troubling” movements of inflation expectations

Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, has expressed concern about the recent volatility of inflation expectations.

"A key lesson from the 1970s is the importance of the credibility of the central bank's commitment to maintaining price stability. Once that credibility is lost, it is very difficult to regain, and economic outcomes are worse as a result. Neither I nor my colleagues wish to see that happen again," he said.

"Thus, I am watching inflation developments and inflation expectations closely. Expectations of inflation as measured by inflation-indexed Treasury securities have generally risen since last fall when deflation seemed to be the fear of many. Short-term expectations have risen even more in recent months, reflecting the rise in oil and gasoline prices. Expectations of inflation over the longer run have also risen since last fall, but their response to the rise in energy and commodity prices has been more muted."

Click here to read the speech.

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