June 24 (Bloomberg) -- Federal Reserve Bank of Philadelphia President Charles Plosser said he’s “fairly optimistic” economic growth will exceed 2.4 percent for the remainder of this year and next amid steady growth in jobs.
The expansion will probably slow to a 2.4 percent trend rate after 2015, said Plosser, who votes on monetary policy this year. Consumption will probably rise as household balance sheets improve and unemployment declines to 5.8 percent by the end of this year and 5.6 percent by the end of 2015, he said today in remarks prepared for a speech to the Economic Club of New York.
“The rebound after the bad winter seems to be progressing, the outlook for unemployment is a bit better, and the inflation rate appears to be firming,” Plosser said. “Current data suggest economic strength is fairly broad-based, as witnessed by recent performance and the optimism expressed by firms in many manufacturing and service sectors.”
Plosser and his colleagues on the Federal Open Market Committee on June 18 trimmed bond buying by $10 billion for the fifth straight meeting, to $35 billion per month, while reiterating that they plan to keep the main rate close to zero for a “considerable time” after ending the purchases.
“The inflation rate appears to be firming,” Plosser said, predicting it will “stabilize” next year at about 2 percent, which is the FOMC’s target.
The personal consumption expenditures index, the Fed’s preferred inflation gauge, rose 1.6 percent from a year earlier in April, the most since November 2012.
Chair Janet Yellen, speaking at a news conference after the FOMC decision, dismissed concern about accelerating inflation, calling recent data on prices “noise.” Plosser backed the FOMC statement and has consistently warned that record stimulus may eventually fuel inflation beyond the Fed’s goal. The central bank has quadrupled its balance sheet since 2008 to a record $4.37 trillion.
The Fed last week revised its 2014 economic growth forecast, reducing its gross domestic product projection to 2.2 percent in 2014 from 2.9 previously forecast. The world’s largest economy shrank at a 1 percent annualized rate in the first quarter after harsh winter weather stalled hiring and consumer spending.
Plosser, 65, said his growth projection “was generally in line with” his colleagues.
Separate forecasts by Fed officials last week predicted the Fed’s main interest rate will be 1.13 percent at the end of 2015 and 2.5 percent a year later. In March, they forecast 1 percent at the end of next year and 2.25 percent in 2016.
The difference in the March and June projections “should not come as a particular surprise as it likely just reveals greater confidence that the economy is improving,” Plosser said. “I believe that we are closing in on our goals -- perhaps faster than some people might think.”