Plosser-Fed must remain vigilant on inflation

[Lone_Star_Dem]

Source: Reuters

BIRMINGHAM, Ala., Feb 6 (Reuters) - The Federal Reserve must remain vigilant against rising inflation pressure this year even as the U.S. economy slows sharply, Philadelphia Federal Reserve President Charles Plosser said on Wednesday.

In a speech to the Rotary Club of Birmingham, Alabama, Plosser said he expects U.S. growth to be "quite weak" in the first half of 2008 and said the jobless rate will rise to 5.25 percent by year end.

But he added that core inflation, which strips out volatile food and energy costs, will remain above 2 percent, forcing the central bank to keep a close watch on inflation expectations.

"Unfortunately, I expect little progress to be made in reducing core inflation this year or next, and I am skeptical that slower economic growth will help," he said.

Read more: http://www.reuters.com/article/bondsNews/idUSN0626308920080206?sp=true