Mpls. Fed chief: 'Easy money' policy should go further

by Annie Baxter, Minnesota Public Radio

ST. PAUL, Minn. — The head of the Federal Reserve Bank of Minneapolis says the central bank's current easy money policy needs to be pushed further.

Last month, the central bank said it would hold interest rates near zero until unemployment falls below 6.5 percent nationally, so long as inflation remains below 2.5 percent.

But Minneapolis Fed President Narayana Kocherlakota said that's not enough.

He wants the central bank to continue making it easy to borrow money until U.S. unemployment falls below 5.5. percent. It's currently at 7.8 percent.

"I do think it's important for the public to know the Fed is going to stay in an accommodative stance until the economy is much closer to being what one might consider normal," Kocherlakota said.

Unemployment will fall but only slowly, Kocherlakota forecasts. He predicts joblessness will be down to around 7.5 percent by year end, and around 7 percent in late 2014.

Kocherlakota said that is he pleased, however, with Fed's clearer articulation of its intentions. He had been a vocal critic of the Fed's failure to tie its actions to specific benchmarks in the unemployment rate.

Kocherlakota is not currently a voting member of the Federal Open Market Committee, which sets monetary policy. Presidents of the Fed's regional banks rotate through the committee. Kocherlakota will be a voting member next year.