Fed’s Plosser Dismisses Negative Effects of Strong Dollar

Philadelphia Federal Reserve president Charles Plosser on Wednesday dismissed concerns of a strong U.S. dollar, saying monetary policy creates consequences and can distort asset prices but the Fed must focus on its mandate.

Plosser said exchange rate movements have historically not tended to affect U.S. inflation, which along with unemployment is the Fed’s “true mandate”.

“The Federal Reserve does not have a foreign exchange goal. I don’t see it (a strong dollar) as a significant risk at this point,” Plosser said, speaking at the UBS European Conference in London.

Turning to interest rates, Plosser, who is due to step down next March, said rates should start rising in the “not too distant future” as the U.S. economy is “way ahead” of where the Fed projected it would be.

“I would prefer that we start to raise rates sooner rather than later. This may allow us to increase rates more gradually as the data improve rather than face the prospect of a more abrupt increase in rates to catch up with market forces,” he said.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza