Fed official: Market misread Yellen comments

NEW YORK — The market overreacted last week, when it dumped stocks amid fears the Federal Reserve was fast-forwarding its rate-hike schedule. So says Philadelphia Fed President Charles Plosser, who was "puzzled" and '"surprised" by the market reaction.

"I don't think the Fed has changed its position," Plosser, a Fed hawk that has criticized its easy-money policies, told business cable channel CNBC in an interview before the market open Tuesday. "In fact, it tried to say very explicitly in its statement that we believe forward guidance or the expectations have not changed as far as we are concerned."

U.S. stock futures shot up in pre-market trading Tuesday after Plosser's comments and stocks surged at the opening bell. The Dow Jones industrial average was up more than 100 points in early trading.

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Plosser basically said the market overreacted to comments last Wednesday from Fed Chief Janet Yellen. The

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Dow tumbled 114 points

that day after she said the central bank could start raising rates six months after its bond-buying program ends.

Wall Street interpreted that as a sign the Fed could start raising rates as early as April 2015, far ahead of the late-2015 timetable many envisioned.

But the Fed remains data-dependent, he says, despite dropping its old quantitative threshold for rising rates, which was a 6.5% unemployment rate in favor of a more qualitative assessment of financial conditions..

"I was surprised the market reacted as much as it did," Plosser said, adding that markets should "get away from talking about time frames; talking about economic conditions is a much better way to think about it."