Fed's Plosser: Inflation Is Uncomfortably High, But March Data is Better

Inflation is uncomfortably high and the U.S. Federal Reserve needs to remain vigilant about it, Philadelphia Federal Reserve Bank President Charles Plosser said this morning.

Plosser, regarded as one of the more hawkish among Fed policy-makers, said that inflation was not coming down fast enough.

"Inflation is uncomfortably high from my perspective and not declining as rapidly as I'd like to see it," he told a meeting of business executives hosted by Rutgers School of Business.

He added: "It's very important that the Fed maintains its vigilance about inflation, that we not let inflation expectations get out of hand," he said. In addition, he said: "If you want to bring inflation down further, you have to be careful about how to do that."

Plosser was upbeat about this morning's consumer inflation report. "It's hard to say too much," he told reporters after a speech on the economic outlook. "But 0.1 (percent) is better than 0.3 (percent)."

"The important question is whether it will continue."

Plosser is not a voting member of the Fed's rate-setting Federal Open Market Committee this year.

In his presentation, Plosser gave a relatively upbeat assessment about the economy, saying he still expected U.S. growth to be around 2.5% to 3.0% this year.

While the housing market creates some uncertainty, there is less risk than some months ago, and he does not expect spillover from troubles in the subprime lending arena to consumer spending.

Plosser said employment is strong, that it is a "bright spot" in the economy, and that consumer spending is supported by employment and wage growth.

However, recent weakness in business investment was a "puzzle," and that while he expected spending to pick up, it added to uncertainty about the economic outlook, he said.