The Federal Reserve is creating “unacceptable” downside risks to U.S. inflation by signaling it will gradually remove monetary stimulus next year despite low inflation, Minneapolis Federal Reserve Bank Narayana Kocherlakota said on Friday.
Instead, Kocherlakota said in a statement to be posted on the regional Fed bank’s website, the U.S. central bank should have pledged to keep rates near zero until the inflation outlook improves. He added that the central bank should also have signaled its willingness to restart its controversial bond-buying program if that pledge does not work to bring inflation expectations back to the Fed’s 2-percent target.
The Federal Reserve should have left itself more flexibility to raise interest rates sooner should the U.S. economy continue to improve, a top U.S. central banker said on Friday.
Instead, the Fed left its rates guidance intact, a decision that “strongly suggests” that short-term borrowing costs will not be significantly above their current near-zero levels by next June, Philadelphia Federal Reserve Bank President Charles Plosser said in a statement on its website.
Ladies & Gentlemen, Inflation!