Monetary policy did not need to become more accommodative at the last meeting of the Federal Open Market Committee, according to Federal Reserve Bank of Minneapolis president Narayana Kocherlakota, so he dissented, according to a statement released Friday.
Regarding the policy statement made after Tuesday’s FOMC meeting, which said the panel “currently anticipates economic conditions … are likely to warrant extraordinarily low levels of the federal funds rate through mid-2013,” Kocherlakota said: “The new language is intended to provide more monetary accommodation than before.”
But, he explained, “I dissented from this change in language because the evolution of macroeconomic data did not reflect a need to make monetary policy more accommodative than in November 2010. In particular, personal consumption expenditure (PCE) inflation rose notably in the first half of 2011, whether or not one includes food and energy. At the same time, while unemployment does remain disturbingly high, it has fallen since November.”
“I can summarize my reasoning as follows,” he said. “I believe that in November, the committee judiciously chose a level of accommodation that was well calibrated for the prevailing economic conditions. Since November, inflation has risen and unemployment has fallen. I do not believe that providing more accommodation — easing monetary policy — is the appropriate response to these changes in the economy.”
“Going forward, my votes on monetary policy will continue to be based on the evolution of the data on PCE inflation and its components, medium-term PCE inflation expectations, and unemployment,” he said.