Rates May Need to Rise Sooner: Philly Fed's Plosser

If the U.S. economy keeps improving, interest rates should be raised this year or in the middle of next year at the latest, Philadelphia Federal Reserve President Charles Plosser told CNBC Monday.

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Last week the Federal Reserve said the current low interest rates would last into the middle of 2014. Plosser told CNBC he was one of six members who thinks it should be earlier than that.

"If the economy evolves as I think it might, then it’s likely it might have to be sooner than that," he said of a mid-2014 increase. "I’ve said previously that I thought it possible rate hikes would have to come before mid-2013. I was unhappy with the calendar date in the statement. I’m still uphappy with the statement. I don’t think it’s the right way to convey policy."

He said it is "clear" from the Fed's statement the mid-2014 date "is contingent on the evolution of the economy. It is not a commitment and shouldn’t be interpreted as a commitment. It’s a conditional statement."

Plosser is a bit more optimistic about 2012 GDP , seeing it at 3 percent while others have forecast a slower rate. He also said the Fed should stop thinking that it has to act, such as with another round of quantitative easing, to improve the economy immediately.

"We need to be patient and stop thinking we need to be doing more," he added.

He acknowledged "we are punishing savers" by keeping rates at near zero. "The policy is to get people to quit saving and start spending," he said. The problem is, when they start liquidating assets "it's gonna be gone" for the next generation.

He also acknowledged low interest rates are forcing some investors to take "unwise risks" in the search for yield from stocks, Plosser said.

"At the Fed we've made it very, very clear we are trying to get them to take some risks, but we can’t control how that happens," he said. "By trying to push people into riskier assets, we don't know the full consequences of that. We could be breeding some problems for us down the road."