Fed's large asset holdings are what push down rates: Kocherlakota

EDEN PRAIRIE, Minn. Wed Jan 16, 2013 11:05am EST

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EDEN PRAIRIE, Minn. Jan 16 (Reuters) - The U.S. central bank's large portfolio of assets, not its monthly asset purchases, are what push down borrowing costs, a top Federal Reserve official said on Wednesday..

"What's important is not our flow of purchases, but rather the stock of assets that we are holding," Minneapolis Federal Reserve Bank President Narayana Kocherlakota said after delivering a speech at a suburban Minneapolis golf course. "We could stop buying, and we would still be putting downward pressure on interest rates."

Kocherlakota repeated remarks from Tuesday in which he called for the Fed to extend its pledge to keep rates low until the unemployment rate drops to 6.5 percent, arguing that using a 5.5 percent threshold would put the economy back on track more quickly.

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