MINNEAPOLIS Jan 16 Lowering interest rates
helps boost the economy and bring down unemployment, a top
Federal Reserve official said on Wednesday, echoing exactly the
phrasing of Fed Chairman Ben Bernanke on the effectiveness of
monetary policy, but advocating a different way of getting
"Is it a panacea, will it cure all ills in the economy?
Absolutely not," Minneapolis Federal Reserve Bank President
Narayana Kocherlakota said after a speech in which he called for
the Fed to ease policy further. "But given the goals that have
been set for us by Congress, it's incumbent to move in the
direction that we're supposed to move, and the policy path, the
change that I've described, I think would be helpful."
Bernanke has often stressed that while easy monetary policy
is not a cure-all, it can help a damaged economy. Last month he
led the Fed in a decision to ramp up asset purchases aimed at
speeding recovery and boosting employment, and to pledge to keep
rates low at least until the unemployment rate falls to 6.5
percent, as long as inflation remains muted.
Kocherlakota this week mounted a public campaign for the Fed
to ease policy even further, not by buying more assets, but by
extending its pledge to keep rates low.
At three Minneapolis-area venues over two days, he has
argued that using a 5.5 percent threshold for any possible
interest-rate increase would put the economy back on track more
quickly than the Fed's 6.5-percent threshold, with little risk
of sparking unwanted inflation.