Fed's Plosser talk.

 June 9 (Bloomberg) -- Philadelphia Federal Reserve Bank
President Charles Plosser warned of inflation pressures from
record stimulus while saying unemployment will probably fall to
between 7 percent and 7.5 percent by the end of next year.
    “I see the inflation risks in the U.S. as being clearly to
the upside,” he said in the text of a speech today in London.
“We must carefully watch for signals of inflation and altered
expectations to ensure that monetary policy stays ahead of the
curve.”
    The district bank chief, echoing June 7 comments by Fed
Chairman Ben S. Bernanke, said economic growth will probably
quicken this year and the Fed needs to maintain the credibility
of its commitment to price stability and ensure expectations for
inflation don’t become unmoored. The economy expanded at a
“steady pace” in most of the U.S., while slowing in four of 12
regions including Plosser’s district, the central bank said
yesterday in its Beige Book survey of the economy.
    “My forecast is for the economy to continue to expand at a
moderate pace and for inflation to move back down from its
current level as oil prices stabilize,” Plosser, 62, said in
remarks to the Society of Business Economists. Policy makers
“need to do all we can to ensure that the public’s expectations
of inflation remain stable.”
    Plosser is a voting member of the Federal Open Market
Committee this year.
    The economy will probably grow at a 3 percent to 3.5
percent rate for the rest of this year and next, and
unemployment is likely to fall from a “disappointing” 9.1
percent level as of May to about 8.5 percent by December,
Plosser said.
                       Expand Payrolls
    “We have a long way to go” to reduce unemployment,
Plosser said. “As the economy strengthens this year, I expect
that businesses will continue to add to their payrolls.”
    Meanwhile, there are signs that “firms are likely to be
testing their pricing power,” he said. “It is somewhat
troubling to me that expectations of inflation in the medium to
longer term are moving up and down as much as they are.”
    The Fed’s preferred price measure, which excludes food and
fuel, was up 1 percent from a year earlier in April. Including
all items, prices rose 2.2 percent. A separate measure from the
Bureau of Labor Statistics shows prices rose 3.2 percent in
April, the most since October 2008.
    Fed officials next meet June 21-22 in Washington. Bernanke
is scheduled to hold his second press conference following the
FOMC’s statement on June 22, just a week before the scheduled
end of the central bank’s $600 billion bond purchase program.