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Fed official mulls early end to bond-buying plan

Fed official mulls early end to bond-buying plan

February 24th, 2011 in News

WASHINGTON (AP) - A Federal Reserve official said Wednesday that he may push for an early end to the central bank's $600 billion bond-purchase program if inflation shows signs of spreading.

Charles Plosser, president of the Federal Reserve Bank of Philadelphia, is an outspoken critic of the program, which is slated to end in June.

In a speech to business people in Birmingham, Ala., Plosser said he "would not rule out" pressing the Fed for an early end to the program if the economy grows more strongly than anticipated and inflation picks up too much speed.

The Fed's next meeting is March 15. Plosser's comments raise the odds that he will vote against maintaining the pace and size of the program at that time.

The bond purchases are intended to invigorate the economy by getting Americans to spend more.

The Fed may signal at its March or late April meeting whether it will end the program on schedule or extend it. Any push to renew the program would likely face stiffer resistance given the improving economy.

Plosser supported maintaining the pace of the program at the Fed's January meeting. He said the Fed had largely signaled ahead of that session that it would proceed with the program. Plosser said he didn't want to undermine the Fed's credibility.

"I supported continuation of the policy in January because it is generally a good practice for a central bank to do what it says it is going to do unless circumstances significantly change," he said. "To do otherwise would undermine the institution's credibility."

Plosser is one of the Fed's most ardent inflation "hawks." That means he is more concerned about inflation rising too quickly than he is about stimulating the economy and lowering unemployment, now at 9 percent.

Soaring prices for commodities like oil and food have pushed inflation higher in the United States.