Kocherlakota calls for more Fed stimulus to aid jobs rebound

  • Updated: January 9, 2014 - 10:22 PM

Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, who votes on policy this year, said the central bank could sooner achieve its goals of full employment and 2 percent inflation by stepping up stimulus.

“By easing monetary policy relative to its current stance, the FOMC could facilitate a more rapid fall in unemployment and more rapid return to 2 percent inflation,” Kocherlakota said Thursday in a speech in Minneapolis.

The policy-setting Federal Open Market Committee, citing improvement in the labor market, decided last month to cut its monthly purchases of bonds to $75 billion from $85 billion. Officials saw declining economic gains from the bond buying, and voiced concerns about future risks to financial stability, according to minutes of their meeting.

The unemployment rate has fallen “disturbingly slowly” and inflation is still running “well under” the Fed’s 2 percent target, Kocherlakota said.

The economy will probably grow 3 percent in 2014, with unemployment falling to 6.5 percent by the end of the year, he said. If the economy improves as expected, the Fed will probably end its bond purchases this year, he added.

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