In an interview with the Wall Street Journal, Philly Fed President Charles Plosser said he doesn't foresee a recession in the coming quarters, and noted recent inflationary measures indicate price-increases are more broad-based than previous indications. "If you really believed the economy was going to be in recession for the fourth and first quarters or the first and second quarters, which I don’t, there’s not much the Fed can do stop that," he said. The bigger question, Plosser contends, is "what will the economy look like and what will inflation look like in the summer and beyond?" Aggressive monetary policy now, he said, could result in a "terribly inflation-risky environment" next year.
Plosser said Q4 and Q1 2008 are likely to be weak, but he's optimistic "things will have significantly improved" by Q3 and Q4 of next year. Recent inflation data, he said, make it unlikely current price increases are isolated price shocks. "It may be evidence that monetary policy had been too easy." Plosser also said he felt the Fed should reconsider its "balance of risks" assessment (Fed's Plosser: FOMC Should Ditch "Balance of Risks" Outlook).
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