Mpls. Fed chief explains dissenting vote in rare statement
(Bloomberg News) — Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said he sees no need for further monetary accommodation, releasing a statement to explain his dissenting vote at the Fed's Aug. 9 meeting.
"I do not believe that providing more accommodation -- easing monetary policy -- is the appropriate response to these changes in the economy," he said today, referring to falling unemployment since November and rising inflation as measured by the Fed's preferred price gauge.
The statement is a rare preemptive move among Fed bank presidents, who typically discuss their decisions for the first time in speeches or in response to questions afterward. It was issued after the Fed's blackout period ended, which is midnight Eastern time on the Thursday after a meeting. Fed officials are prohibited from speaking on policy or the economy until the blackout is lifted.
This week, Kocherlakota joined two other regional bank presidents, Charles Plosser of Philadelphia and Richard Fisher of Dallas, in posing the most opposition to a Fed decision in almost 19 years. They dissented from a pledge by the Federal Open Market Committee to hold interest rates near zero until at least mid-2013, preferring instead to maintain a commitment to do so for an unspecified "extended period."
"I dissented from this change in language because the evolution of macroeconomic data did not reflect a need to make monetary policy more accommodative than in November 2010," when the Fed launched a second round of quantitative easing, said Kocherlakota, 47, the Fed's youngest policy maker.
"I believe that in November, the Committee judiciously chose a level of accommodation that was well calibrated for the prevailing economic conditions," he said. Unemployment remains "disturbingly high," yet has fallen since November. The jobless rate stood at 9.1 percent as of July, down from 9.8 percent in November.
Kocherlakota, who has led the Minneapolis Fed since October 2009, said his future votes will be "based on the evolution of the data" on the personal consumption expenditures price index, medium-term inflation expectations, and unemployment.
The Minneapolis bank president built his career in academia and is former chairman of the economics department at the University of Minnesota in Minneapolis.