Minneapolis Federal Reserve Bank President Narayana Kocherlakota warned Tuesday that reducing Fed asset purchases from current levels would exert a "drag" on an already sluggish economy and said the Fed should consider expanding bond buying and taking other steps to stimulate the economy to achieve "maximum" employment "as rapidly as it can."

Kocherlakota, who will be a voting member of the Fed's policymaking Federal Open Market Committee next year, said the FOMC should also consider reducing the rate of interest it pays on excess reserves (IOER) from the current 25 basis points.

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