BOSTON, June 5 (Reuters) - The Federal Reserve is keeping interest rates low so as to stimulate spending in an environment where people are spending too little, and not because it is secretly worried about the future, a top U.S. central bank policymaker said on Wednesday.
“Its not like we have a magic eight ball telling us what will happen,” Minneapolis Fed President Narayana Kocherlakota said at Boston College’s Carroll School of Management in response to a question about whether low rates signal Fed worries about the future. “People shouldn’t be looking at our actions and thinking we have some secret source of information about what is going to happen.”
Kocherlakota said one side-effect of low rates is an increase in merger activity, which one audience member suggested could hurt jobs if acquisitive companies trim staff to streamline costs. Kocherlakota said that low rates can be expected to boost demand, offsetting the drag on employment that mergers might otherwise have. (Reporting by Richard Valdmanis; writing by Ann Saphir; Editing by Chizu Nomiyama)