By Dow Jones Business News, October 04, 2013, 04:11:00 PM EDT
(Adds comments on government shutdown and September Fed decision)
By Michael S. Derby
NEW YORK--Minneapolis Fed leader Narayana Kocherlakota repeated on Friday his call for the central bank to do whatever
it can to get the unemployment rate to fall quickly.
The official's speech largely repeated remarks he made in late September, in the wake of the Fed's shock policy
meeting that saw officials press forward with their easy money policy against broad market expectations they'd cut back
on the stimulus. Mr. Kocherlakota has been a steadfast supporter of aggressive action, and he repeated his call for the
Fed to do even more than it currently is to bring down the unemployment rate quickly.
"There is considerable monetary policy capacity" still available to the Fed, even with the Fed's short-term interest
rate target pegged at zero percent, and the balance sheet swollen to historic levels, Mr. Kocherlakota said.
The Fed must do "whatever it takes in the next few years" to lower an unacceptably high unemployment rate, he said. He
noted that even though the jobless rate had fallen since the end of the recession, it remains high, and the amount of
progress suggested by the jobless rate drop actually overstates the level of improvement.
Mr. Kocherlakota repeated that the Fed must be "willing to continue to use the unconventional monetary policy tools
that it has employed in the past few years." He added that "doing whatever it takes will mean keeping a historically
unusual amount of monetary stimulus in place--and possibly providing more stimulus."
The central banker's comments came from the text of a speech he delivered in Bloomington, Minn. He isn't currently a
voting member of the monetary policy-setting Federal Open Market Committee.
He said in response to an audience question he was surprised that markets were so surprised by the choice the Fed made
when it decided to continue, and not trim, it's $85 billion-per-month bond-buying stimulus effort.
"I don't think there's any literal disconnect between what was communicated by the committee and what we actually
ended up doing in September," Mr. Kocherlakota said.
The official also said that the longer the government shutdown persists, the greater the risks to the economy. "If the
shutdown remains short in duration, I think it will have resolutely minimal effects on the U.S. economy," he said.
--Douglas Fehlen in Bloomington, Minn., contributed to this article.
Write to Michael S. Derby at Michael.firstname.lastname@example.org
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