Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said U.S. central bankers can spur economic growth by clarifying the conditions that would prompt a slowing or halt to the Fed’s asset purchases.
“Monetary policy should be more accommodative,” Kocherlakota said in the text of prepared remarks given in Grand Forks, North Dakota today. “The FOMC could reduce the public’s level of policy uncertainty by clarifying the nature of the economic conditions that would lead the Committee to reduce or stop its current asset purchases.”
The policy-setting Federal Open Market Committee has debated when to start reducing the pace of monthly bond buying as the economic expansion gathers steam and some officials voice concerns about the risks from continuing the program. Fed officials last month affirmed a plan to keep buying $85 billion a month in Treasuries and mortgage-backed securities.
Kocherlakota, who does not vote on policy this year, said last month he favors lowering the unemployment rate the Fed has said may prompt a policy tightening. His remarks are similar to a speech he gave on March 27 in Edina, Minnesota.
The U.S. central bank says it will keep its benchmark interest rate near zero as long as the jobless rate is above 6.5 percent and projected inflation is no more than 2.5 percent. The FOMC has provided less specific guidance on how long it expects to continue quantitative easing, noting that officials are looking for substantial improvement in the labor market.
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