crisis nor is the labor market in the same dire straits it was five years ago. in its july statement, the fomc reaffirmed its highly accommodative stance. the statement noted that “ in determining how long to maintain the current 0 to ¼ percent target range for the federal funds rate, the committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2 percent inflation. ” in assessing this progress, the committee reported that it will look at a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. the fomc also noted, based on its assessment of these factors, “ that it likely will be appropriate to keep its target federal funds rate near zero for a considerable time after the asset purchase program ends... ” i objected to this forward guidance regarding the expected timing for raising the funds rate because i believe this language is no longer appropriate or warranted. appropriate monetary policy must respond to the data. i believe that by indicating that the fomc continues to anticipate that it will be a “ considerable time ” after the end of asset purchases before it is likely that the committee will raise interest rates does not reflect the significant progress toward our goals. it also limits the committee ’ s flexibility to take action going forward. we have moved much closer to our goals since last december, and, as we do so, the stance of monetary policy should reflect such progress and begin to gradually adjust. that is the essence of being data dependent. in the current context, we must acknowledge and thus prepare the markets for the fact that interest rates may begin to increase sooner than previously anticipated. i felt that adjusting our language was the appropriate first step in responding to better - than - anticipated economic conditions. my view is informed, as i have indicated, by realized and projected economic progress toward our goals. but it is also influenced by guidance gained from the historical conduct of past monetary policy. in particular, my views on the appropriate funds rate setting are – and continue to be – informed by taylor - type monetary policy rules that depict the past behavior of monetary policy. i find such rules useful for benchmarking my policy prescriptions. these rules have been widely investigated and have been shown to be robust, in that they deliver good results in a wide variety of models and circumstances. the guidance i take from such robust rules is that we should no longer consider monetary policy as being

charles i plosser : the economic outlook speech by mr charles i plosser, president and chief executive officer of the federal reserve bank of philadelphia, at the pennsylvania association of community bankers ’ 137th annual convention, amelia island, florida, 6 september 2014. * * * the views expressed are my own and not necessarily those of the federal reserve system or the fomc. highlights • president charles plosser gives his views on the economy and shares some thoughts about the stance of monetary policy. • president plosser believes that forward guidance should be adjusted to reflect economic realities and to give the fomc the flexibility to respond gradually to the evolution of the economy. • president plosser counters the view that rates cannot be raised because the labor market has not “ completely ” healed. he discusses two major risks with this strategy. first, economists do not know what maximum employment is and cannot easily measure it. second, waiting until we are completely confident the labor market has fully recovered risks that monetary policy will be behind the curve and could lead to a return to abrupt “ go - stop ” policies of the past that led to unwelcome volatility. • while he is not suggesting that rates should necessarily be increased now, president plosser sees that the first task is to change the language and to begin signaling that liftoff may occur sooner than many now anticipate and sooner than suggested by the current fomc guidance. introduction good morning. thank you for the opportunity to speak at this 137th annual convention of the pennsylvania association of community bankers. community banks have a long and venerable history in our nation, and the 137 years of the pacb is a powerful testament to your roots as stalwarts in our financial system. i would note that the longevity of this convention means that your organization significantly predates the federal reserve system, which is observing its centennial this year. my suspicion is that there are a number of community bankers here today who can trace their corporate histories to firms that petitioned for the establishment of a federal reserve bank in philadelphia 100 years ago. i actually have two letters here. one from the new tripoli national bank dated december 27, 1913, and one from the first national bank of mifflintown dated december 26, 1913, both addressed to william mcadoo, secretary of the treasury, requesting the establishment of a federal reserve bank in the city of philadelphia. over the years, community banking organizations, whether they are state member banks or