charles i plosser : systematic policy and forward guidance remarks by mr charles i plosser, president and chief executive officer of the federal reserve bank of philadelphia, at the money marketeers of new york university, inc., down town association, new york, 25 march 2014. * * * the views expressed are my own and not necessarily those of the federal reserve system or the fomc. highlights • president plosser highlights the relationship between systematic monetary policy and forward guidance. his goal is to help underscore how a systematic approach to monetary policy can improve the effectiveness of monetary policy in both normal times and in more unusual or extreme circumstances, such as when policy is constrained by the zero lower bound on nominal interest rates. • president plosser ’ s preference for dealing with forward guidance is for the fomc to articulate a reaction function as best it can. this entails describing a systematic approach to policymaking, where policy decisions are based on available information in a consistent and predictable way. • president plosser believes the most recent fomc statement took a step in this direction when it moved to a qualitative form of forward guidance by stating that the committee will be assessing progress – both realized and expected – toward its policy objectives. introduction i want to thank william kanto and the money marketeers for inviting me to speak again this evening. your series of guest speakers over the years has been quite illustrious, and it has included many federal reserve governors and presidents, not to mention distinguished economists and a wide array of others. so, before i share some thoughts on monetary policy with you tonight, i will begin with the usual disclaimer that my views are my own and do not necessarily reflect those of the federal reserve system or my colleagues on the federal open market committee ( fomc ). of course, that disclaimer is a two - way street, and you should not necessarily associate the views of my colleagues with my views. i believe that this diversity of views among fomc participants does more than assure variety among your guest speakers. it is one of the great strengths of our decentralized central bank. open dialogue and diversity of views leads to better policy decisions and is the primary means by which new ideas are gradually incorporated into our monetary policy framework. thus, i believe diversity of thought is a sign of thoughtful progress. as i noted in 2009 when i last spoke to you, the famous american journalist walter lippmann once said,

conclusion in summary, the u. s. economy is continuing to grow at a moderate pace. i expect annual growth of around 3 percent in 2012 and 2013. prospects for labor markets will continue to improve, with job growth strengthening and the unemployment rate falling gradually over time. i believe inflation expectations will be relatively stable and inflation will moderate in the near term. however, with the very accommodative stance of monetary policy, we must guard against the medium - and longerterm risks of inflation and the potential for distortions such accommodation can create. finally, i believe we must also guard against an accelerationist approach to policy – one that calls for monetary policy to do more and more in an attempt to get to our objectives that much faster. the risks to economic stability of such an approach over the medium term could be quite high and could jeopardize our ability to achieve our longer - terms goals. bis central bankers ’ speeches