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Philadelphia Fed chief adds warning

WASHINGTON — Federal Reserve Bank of Philadelphia president Charles Plosser said Tuesday that new bond buying announced by the Fed this month probably won’t boost growth or hiring and may jeopardize the central bank’s credibility.

‘‘We are unlikely to see much benefit to growth or to employment from further asset purchases,’’ Plosser said in the text of a speech prepared for delivery at the reserve bank in Philadelphia. ‘‘Conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed’s credibility.’’

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The Federal Open Market Committee said Sept. 13 that it will undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets ‘‘improve substantially.’’ Policy makers are using unconventional tools to attack a jobless rate stuck above 8 percent since February 2009.

Economic research indicates that additional asset purchases are ‘‘unlikely to reduce long-term interest rates by a significant amount’’ and that lowering rates ‘‘by a few more basis points’’ won’t spur growth and hiring, said Plosser, who doesn’t have a vote on policy this year. The US economy is growing ‘‘at a moderate pace’’ and probably will expand by about 3 percent in 2013 and 2014, he said.

‘‘Every monetary policy action has costs and benefits, and my assessment is that the potential costs and risks associated with these actions outweigh the potential meager benefits,” Plosser said.

‘‘The Fed’s most recent actions carry with them significant risks,’’ Plosser said. ‘‘I am not forecasting that those risks will necessarily materialize and I hope they will not. But if they do, they could prove quite costly to the economy.’’

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