Outgoing Fed official warns of danger of verbal mishaps

Philadelphia

VERBAL missteps by the US Federal Reserve have increased the risk of a volatile market reaction when the time comes to raise interest rates, the outgoing president of the Philadelphia Fed said.

A week before stepping down from the US central bank, Charles Plosser said on Friday that the Fed can start sending the right message at a policy meeting next month, when he speculated it will likely drop a reference to patience in describing its approach to tightening monetary policy.

With interest rates near record lows and investors globally closely eyeing the Fed, just how deftly Mr Plosser's colleagues handle that communications challenge will determine how smoothly they can pull off the first rate hike in nearly a decade. "I worry the risks of volatility or snap-backs when the Fed actually moves is probably greater than it needs to be," Mr Plosser said in his third-floor office at the Philadelphia Federal Reserve, a few paintings and books already packed in wooden and cardboa…