Some people change for the better

Minneapolis Fed President Narayana Kochaerlakota is certainly one of them

Kocherlakota 3 years ago:

Of course, the key question is: How much of the current unemployment rate is really due to mismatch, as opposed to conditions that the Fed can readily ameliorate? The answer seems to be a lot. I mentioned that the relationship between unemployment and job openings was stable from December 2000 through June 2008. Were that stable relationship still in place today, and given the current job opening rate of 2.2 percent, we would have an unemployment rate of closer to 6.5 percent, not 9.5 percent. Most of the existing unemployment represents mismatch that is not readily amenable to monetary policy.

Kocherlakota today:

The head of the Federal Reserve Bank of Minneapolis said Thursday the U.S. central bank needs to take a far more aggressive approach to lowering high levels of unemployment in a situation that has strong parallels with the radical action the Fed took to break the back of high inflation a generation ago.

The official, Narayana Kocherlakota, stopped short of saying what actions theFederal Reserve should take to engineer a quick decline in the unemployment rate. But he did say that those who fear monetary policy action has little power left after half a decade of unprecedented actions are wrong.

“The good news is that, with low inflation, the [Federal Open Market Committee] has considerable monetary policy capacity at its disposal” to help aid a labor market where the unemployment rate is, at 7.3%, “still unusually high.”

The official explained that “the FOMC has a lot of room to provide much needed stimulus to the labor market” and that everything should be on the table in pursuit of that goal. “Doing whatever it takes will mean keeping a historically unusual amount of monetary stimulus in place–and possibly providing more stimulus.”

If  only he ‘switched’ from emphasizing the labor market to emphasizing nominal spending…

Update: Scott Sumner ‘appointed’ Kocherlakota his ‘alter ego’ at the FOMC’

HT Patricia Stefani

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