Minneapolis Federal Reserve Bank President Narayana Kocherlakota on Wednesday aired his doubts about the course of Fed policy, saying that he found it hard to understand why the U.S. central bank is reducing accommodation in the face of low inflation.
"As long as we have inflation as low as we have, there's more that we can do," he said after a speech.
"The overarching course of policy has been to reduce accommodation, really, I would say, going back to the latter part of 2013...With inflation as low as it is, why is it that accommodation has been reduced? I think that's a question that's hard to answer."
Kocherlakota cast the lone dissenting vote last month at the Fed's policy-setting meeting where his colleagues took the historic step of ending the Fed's massive bond-buying stimulus.
Kocherlakota, repeating remarks made Oct. 7, also said that an interest-rate hike at any time in 2015 would be "inappropriate" because of the muted outlook for inflation.
“Sluggish inflation outlook implies that, at any FOMC meeting held during 2015, inflation would be expected to be below 2 percent over the following two years,” he said.
“It would be inappropriate for the FOMC to raise the target range for the fed funds rate at any such meeting,” he said, echoing comments he’s made before.
“Inflation tends to be highly persistent, and so this long stay below target suggests that it will take some time for inflation to get back to 2 percent,” he said.
“The FOMC should consider articulating a benchmark two-year time horizon for returning inflation to the 2 percent goal,” Kocherlakota said.
“If the FOMC publicly articulated a reasonable time benchmark for achieving the inflation goal, the Committee would be led to pursue its inflation target with even more alacrity.”
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