Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said central bankers should use probabilities of outcomes derived from financial-market prices in their policy making.
“Policy makers need some way to gauge the relative likelihood of future events,” Kocherlakota said in slides prepared for a speech in New York. “For policymakers that care about social welfare, the relevant probability is a risk-neutral probability.”
He did not comment on the outlook for the U.S. economy or monetary policy in the slides of his remarks today.