With Federal Reserve Chair Janet Yellen signaling the longstanding stimulative monetary policy would be coming to an end, just how ready is the U.S. economy for a shift in policy? Former Philadelphia Federal Reserve President Charles Plosser says it is. "I think it has been for some time.”
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Plosser told the FOX Business Network's Maria Bartiromo rising interest rates would not hurt the economy. “I think that the reason the economy is slow has little to do with monetary policy or of it being either too restrictive or too stimulative at some point.” Plosser said issues such as tax reform are more important factors for the economic outlook. "I think the key to this is confidence, the key to this is tax reform, the key to this is raising productivity in this country.”
Plosser said President Trump’s policies, along with a shift in Federal Reserve policy, are building confidence in the economy.
“I think if you look at, as the president suggested, if you look at optimism and sort of forward looking indicators in the marketplace whether it’d be the stock market or other things, things have clearly improved but they’re really about expectations of the future,” Plosser said.
But Plossser warned the optimism could wane if Republican economic policies don’t get implemented.
“I think the real test is going to be whether the policies that the Republicans and the president have advocated that the public seems to think will advance the economy actually come to pass and what form.”
Plosser said uncertainty has been a major hurdle to businesses investing in jobs. “The argument has been for a long time that they were uncertain about the future of the country, uncertain about policies, uncertainty about regulations, about tax reform.”
But Plosser predicts the policies of Trump and Congressional Republicans will ultimately remove that uncertainty.
“I think that Trump and the Republicans and their efforts to either get control of government regulation, either roll it back or at least reign it in a bit, as well as tax reform are two of the biggest issues that could have some positive effects for the economy.”