Narayana Kocherlakota, head of the Federal Reserve Bank of Minneapolis, took the unusual step Friday of posting a videotaped statement explaining why he dissented from the recent Federal Open Market Committee decision to hold interest rates near zero through at least mid-2013.
Kocherlakota was one of three members of the Federal Open Market Committee -- the policymaking arm of the Federal Reserve System -- who dissented on Tuesday's interest rate decisions. It passed 7-3.
Such division on the board itself is unusual and has prompted speculation that Fed Chair Ben Bernanke may not have the full support of the panel in future decisions. The last time there were three dissents on an FOMC statement was in November 1992.
But Kocherlakota's move to post a videotaped statement is noteworthy for its directness. Most members who dissent let their views be known at some later point in less direct ways, such as mentioning it in a speech.
In his statement Friday, posted prominently on www.minneapolisfed.org, Kocherlakota said he dissented because he thinks the decision may keep rates too low for too long, or in Fedspeak, is too "accommodative." He pointed to signs of inflation and the fact that unemployment, while still high, has fallen since November.
"I do not believe that providing more accommodation -- easing monetary policy -- is the appropriate response to these changes in the economy," Kocherlakota said.
Previously, the Fed has said it would keep the federal funds rate at near zero "for an extended period," which Kocherlakota said was generally interpreted to mean between three and six months.
Kocherlakota said he issued his statement because he believes that "transparency is an essential part of effective policy formation."
