The Wall Street Journal is quick off the mark with analysis of Kocherlakota’s speech, and its ungated!
- The Federal Reserve should be more proactive about ensuring U.S. inflation hits its 2% target, since undershooting that goal as the central bank has been doing recently endangers economic growth
- Said Fed officials should make clear their 2% inflation goal is “symmetric” in that policy makers will be equally preoccupied about falling short of target as they are about exceeding it. Otherwise, Mr. Kocherlakota warns, the public and markets will no longer believe the Fed’s target is credible
- “Inflation persistently below the 2% target could create doubts in households and businesses about whether the FOMC is truly aiming for 2% inflation, or some lower number … This kind of unmooring of inflation expectations would reduce the effectiveness of monetary policy as a mitigant against adverse macroeconomic shocks.”
Much more at the link