Kocherlaktoa wants UE rate threshold lowered to 5.5%

|By:, SA News Editor

"New guidance weakens the credibility of the Committee’s commitment to target 2 percent inflation," says Minneapolis Fed boss Kocherlakota, explaining his dovish dissent from Wednesday's FOMC decision on forward guidance. The other reason: "New guidance fosters policy uncertainty and thereby suppresses economic activity."

Mostly worried inflation - as measured by the PCE rate - is closer to 1% than the 2% target, Kocherlakota wants to see forward guidance communicating "purposeful steps being taken to facilitate a more rapid increase of inflation."

What he would have liked to have seen: "“The Committee anticipates keeping the fed funds rate in its current range at least until the unemployment rate has fallen below 5.5 percent, as long as the one-to-two-year-ahead outlook for PCE inflation remains below 2 1/4 percent, longer-term inflation expectations remain well-anchored, and possible risks to financial stability remain well-contained.”