| WASHINGTON, March 21
WASHINGTON, March 21 The Federal Reserve should
have promised to keep rates near zero until U.S. unemployment
falls below 5.5 percent, as long as inflation and financial
stability risks are contained, said the lone dissenter to the
Fed's policy decision this week.
By dropping the Fed's pledge to keep rates low until the
jobless rate reaches a more healthy level, the U.S. central bank
is sending the wrong message on both inflation and jobs,
Minneapolis Federal Reserve Bank President Narayana Kocherlakota
said in remarks released on Friday.
On Wednesday the Fed, in its first policy-setting meeting
under Fed Chair Janet Yellen, said it would factor in a wide
range of economic measures as it judged the correct timing for
Rates have been kept near zero since December 2008, and the
Fed had since December 2012 promised to keep them there until
the unemployment rate fell to at least 6.5 percent.
With unemployment now at 6.7 percent, Yellen said the Fed
needed to provide a better sense of what would drive interest
rate policy, beyond a single labor market statistic.
The new rate guidance "does not communicate purposeful steps
being taken to facilitate a more rapid increase of inflation
back to the 2 percent target," Kocherlakota said, and suggests
"the committee views persistently sub-2-percent inflation as an
It also creates uncertainty over economic growth prospects,
he said, by giving little information about how fast the Fed
wants the economy to return to full employment, and even about
the level of unemployment it views as being consistent with full
(Reporting by Ann Saphir; Editing by Chizu Nomiyama)