Fed's Kocherlakota: do 'whatever it takes' to spur U.S. hiring

BLOOMINGTON, Minnesota Fri Oct 4, 2013 2:13pm EDT

Minneapolis Federal Reserve Bank President Narayana Kocherlakota speaks at a macro-finance conference hosted by the Boston Federal Reserve Bank and Boston University in Boston, Massachusetts in this November 30, 2012 file photo. REUTERS/Brian Snyder/Files

Minneapolis Federal Reserve Bank President Narayana Kocherlakota speaks at a macro-finance conference hosted by the Boston Federal Reserve Bank and Boston University in Boston, Massachusetts in this November 30, 2012 file photo.

Credit: Reuters/Brian Snyder/Files

BLOOMINGTON, Minnesota (Reuters) - The Federal Reserve should do "whatever it takes" to drive down U.S. unemployment, even if this means courting concerns of another asset price bubble, or if inflation pops temporarily above two percent, a senior U.S. central banker said on Friday.

"The labor market remains disturbingly weak. The good news is that, with low inflation, the FOMC has considerable monetary policy capacity at its disposal with which to address this problem," said Minneapolis Fed President Narayana Kocherlakota, referring to the policy-setting Federal Open Market Committee.

His comments closely followed a speech he gave last week.

"Doing whatever it takes will mean keeping a historically unusual amount of monetary stimulus in place — and possibly providing more stimulus," he said in prepared remarks.

Kocherlakota added that this would be the case "even as" rising asset prices courted concerns of another bubble, or the medium term outlook for inflation rose above 2 percent, the Fed's stated medium-term goal.

"It may not be easy to stick to this path. But I anticipate that the benefits of doing so, in terms of employment gains, will be significant," he said.

The Fed stunned markets last month by opting to continue to keep buying bonds at an $85 billion monthly pace, despite widespread expectations it would start to scale back, signaling the end to an unprecedented phase of ultra-easy monetary policy.

Its caution has since appeared to have been vindicated by economic unease caused by political gridlock in Washington.

A stand-off between President Barack Obama's Democrats and Republican Tea Party conservatives triggered a government shutdown and is courting a damaging debt default, if lawmakers fail to raise the U.S. debt ceiling by October 17.

Officials, including from the Fed, warn this could potentially tip the United States back into a severe recession.

Kocherlakota did not refer to the battles in Washington in his prepared remarks. But he did stress the need to act decisively to speed up the pace of U.S. hiring.

"In 2013, the FOMC's goal should be to return employment to its maximal level as rapidly as it can, while still keeping inflation close to, although possibly temporarily above, the target of 2 percent," he said.

(Writing by Alister Bull; Editing by Chizu Nomiyama)

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Comments (3)
reality-again wrote:
Noble goal indeed, especially when phrased in such populist terms.
But where’s the proof that the Fed’s QE program has any positive ROI these days?
Where’s the solid risk analysis one would expect to see in such a case?
Who will be accountable for the financial bubbles growing before our very eyes as a result of the Fed’s QE program?

What’s going on here?

Oct 04, 2013 3:46pm EDT  --  Report as abuse
abb68 wrote:
Fed’s Kocherlakota wants more stimulus. One have to live in an ivory tower like his to think that.
past qe efforts have meant:
–the rich get richer via Fed-fueled asset inflation.
–the poor get poorer as prices rise on basic goods and job growth is anemic.
–those on fixed income get crushed since the interest they live on is reduced to near nil.

Oct 04, 2013 6:37pm EDT  --  Report as abuse
sincitylife wrote:
As Americans, we have a right to “opt-out” of the federal reserve banking system. What we need is an alternative competitive currency…a more stable and transparent monetary policy. The US Dollar will be heading toward a “Weimar Republic” devaluation once the markets absorb all these newly created US Dollars at a tune of 85 billion per month and counting. There will be no tapering folks…stock up on hard assets while you still can folks…because the SHTF is gonna happen within 10years…only folks with hard assets will come on top.

Oct 06, 2013 7:42pm EDT  --  Report as abuse
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