Minneapolis Fed Chief Reveals Current Thoughts of the Committee and How the Fed Could Provide More Stimulus

“Minneapolis Fed Chief Narayana Kocherlakota used to be among the more hawkish Fed chiefs.

Now he’s among the more dovish.

And in a speech today he provides an answer of how the Fed could provide even more stimulus.

Basically, the Fed could say that it won’t stop easing until unemployment hits 5.5%, rather than the current 6.5% target.

Here’s what he said in a speech today. Understanding this is crucial to understanding the Fed’s current thinking:

Based on my outlook for the next two years, I’ve concluded that the FOMC would better fulfill both of its congressional mandates by adding more monetary policy accommodation. But how best to do so? In its current forward guidance, the FOMC has stated that it expects the fed funds rate to remain extraordinarily low at least until the unemployment rate falls below 6.5 percent. In my view, it would be appropriate for the FOMC to provide more needed stimulus by lowering the threshold unemployment rate from 6.5 percent to 5.5 percent….”

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