Fed Too Pessimistic, More Easing Not Needed: Plosser
The Federal Reserve is taking too dim a view on the U.S. economy and hasn't conveyed the proper message about what its role will be in the future, Philadelphia Fed President Charles Plosser told CNBC.
Plosser was one of three dissenters from the most recent communique from the Fed Open Market Committee , which said earlier this month that it would continue to keep its interest-rate target near zero for at least two more years.
That's a mistake, he argued, because the central bank should let financial conditions and not an arbitrary time frame dictate its decisions.
"Monetary policy should be dictated on the state of the economy, not on the calendar. A lot can happen in two years," Plosser said. "I think we need to be clear about conditioning our actions on how the economy evolves...I didn't think it was a well-crafted communication strategy that we used."
Plosser spoke just two hours or so before Fed Chairman Ben Bernanke is scheduled to give his much-anticipated speech from Jackson Hole, Wyo., where leaders of the central bank gather each year to hash out future monetary policy.
Though normally a low-key event, this year's gathering has become significant because a year ago Bernanke tipped his hand toward a second round of quantitative easing, triggering a sharp rally in the stock market.
Plosser does not believe the Fed should embark on more easing. While stocks rallied, other economic indicators have weakened since the onset of the second round of easing, often referred to as QE2.
"I'm not sure that it would be beneficial to the problems that we're facing," he said. "I didn't think that what we did in August (last year) was going to help the economy very much."