Kocherlakota: Fed Could Do Better in Achieving Job, Inflation Goals; Official Is a Strong Advocate for Aggressive Steps to Lift Job Market's Prospects
NEW YORK--Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said on Tuesday the U.S. central bank needs a more effective plan to boost hiring and get tepid inflation back to its official target.</br></br>"We need to do better as a committee" to achieve the hiring and price pressure mandates Congress has directed the Fed to achieve, Mr. Kocherlakota said in the text of a speech prepared for delivery before a local group in Rochester, Minn. When it comes to creating a policy that will prove more effective in driving the economy forward, the official said, "I look forward to working with my colleagues to make that happen."</br></br>But Mr. Kocherlakota stopped short in his speech of saying what he would like to see done. The official is currently a voting member of monetary-policy setting Federal Open Market Committee. At the FOMC's March meeting, he dissented against the committee's decision to stop providing numbers-based guidance about the potential timing of interest-rate rises.</br></br>Ahead of last month's meetings, the Fed said it wouldn't consider increases in short-term rates until unemployment fell well past 6.5% as long as expected inflation stayed under 2.5%. A rapid and still hard-to-explain decline in unemployment--joblessness currently stands at 6.7%--drove the Fed to shift the way it describes its expected path for monetary policy. Now, the FOMC says rate increases are off the table until a broader and vaguer set of improvements are seen in the job market.</br></br>Mr. Kocherlakota believed the change in the Fed's language weakened its commitment to push very weak levels of inflation back to the official target of 2%. He said he would have preferred for the Fed's existing guidance to have been altered, and for the rate increase threshold to have been lowered to 5.5%.