Charles Plosser, President of the Federal Reserve Bank of Philadelphia, spoke today saying FED may tighten policy before year-end. 

Plosser made a press conference after speaking at an event organized by the Bank of Finland in Helsinki.

We will have to begin exiting from our policies long before the unemployment rate is down to what people would like to have.  That's going to be a difficult decision, Plosser said.

The following are the highlights:

  • Plosser: hurdle for a QE3 would be very high
  • Plosser: somewhat tighter policy possible by end of year
  • Plosser: gradual recovery for US economy
  • Plosser: despite disappointing jobs report, medium-term fundamental view remains unchanged
  • Plosser: FED should head towards FED funds framework as it normalizes policy
  • Plosser: reasonable for public to be concerned about inflation down the road
  • Plosser: floor system operating framework would be troubling
  • Plosser: FED'S credibility crucial, must communicate easy monetary policy exit strategy clearly
  • Plosser: FED, BOE face daunting challenges as they unwind easy money policies
  • Plosser: volatility suggests less-than-desired confidence in credibility of fed's price stability pledge
  • Plosser: troubling that public's inflation concerns can be so volatile

The next FOMC meeting will be held on Wednesday June 22 12:30PM EST and Plosser is a voting member.  Market reaction of Plosser's comments were muted however implications of FED exiting before 'US unemployment rate down to what people would like to have' could be Dollar positive.  Even though Plosser did not make specific comments about interest rate hikes, the US Dollar can still go higher with talks of FED exit as the end of QE2 nears, end of June.