"We are on a path that says low for long and we have no plans to raise interest rates anytime soon, yet as the data keeps telling us, we ought to be raising rates"
- Charkes Plosser, Philadelphia Fed President
Federal Reserve presidents differ on whether a drop in the U.S. jobless rate to the six-year low warrants advancing the timing for an increase in interest rates. While Philadelphia Fed President Charles Plosser believes that the Fed might lose credibility and control of inflation by waiting too long to hike rates, and positive economic data already suggest a need tighten monetary policy, Chicago's Charles Evans and Atlanta's Dennis Lockhart say that low inflation and slack in the country's labour market provide the bank with time till the second half of 2015 or 2016. Lockhart warned against pulling the trigger too soon, arguing there is still not enough evidence the Fed is close to achieving its twin goals of maximum employment and price stability. Meanwhile, St. Louis Fed President James Bullard warned that inflation will rise above the Fed's target late next year. However, most FOMC participants reiterated their view last month that the Fed will refrain from raising its benchmark rate until 2015.
Fed policy makers are approaching their targets for full employment and price stability faster than they had expected, sharpening the debate over the timing of a rate increase. Unemployment rate declined to 6.1% in June, the lowest level in almost six years, while consumer price inflation rose 1.8% in May, posting the biggest 12-month advance since October 2012. Nevertheless, the inflation rate still remains slightly below the Fed target of 2%.
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