Charles Plosser, president of the Federal Reserve Bank of Philadelphia, went way beyond merely paying lip service to inflation-fighting in a speech today in Alabama. The stock market took this badly and reversed a 100-point Dow gain from earlier in the day. Plosser is only speaking for himself, but it sounds like he is less than eager to continue the Fed's course of lowering short-term interest rates. Excerpts from the Bloomberg story:

The Philadelphia Fed chief said the ``aggressive'' rate cuts will help U.S. growth return to its 2.7 percent trend rate next year. At the same time, he warned that slower growth by itself won't tame inflation and that there are some signs from price expectations that the Fed's credibility may be weakening.

Adjusted for inflation, the Fed's benchmark rate ``is now approaching zero,'' making it ``clearly an accommodative level,'' Plosser said.

Fed rate cuts alone can't solve all ``economic ills,'' such as bad debts in the mortgage market, the re-pricing of subprime- mortgage securities and potential lower ratings for some financial companies, Plosser said.

``The markets will have to solve these problems, as indeed they will,'' Plosser said. ``But it will take some time. However, the Fed can and should help by offsetting some of the restraint created by tightening credit conditions and the sharp reduction in housing investment.''

Plosser, whose anti-inflation stance has been among the Fed's toughest, said he is ``skeptical'' that slower economic growth will reduce so-called ``core'' inflation, which excludes food and energy costs. ``I expect little progress to be made in reducing core inflation this year or next,'' he said.

``Fortunately, so far inflation expectations have not changed very much,'' Plosser said. ``But they bear watching because there are some signs that they, too, are edging higher. These may be early warning signs of a weakening of our credibility, and we must be very careful to avoid that.''