JACKSON HOLE, Wyo. — Minneapolis Federal Reserve Bank President Naryana Kocherlakota suggested a long-term need for highly stimulative monetary policies Saturday.
Kocherlakota, participating in a discussion at the Kansas City Federal Reserve Bank's annual symposium, said that, although the Fed has cut the overnight federal funds rate near zero and has been buying $85 billion of bonds per month to hold down long-term interest rates, it has not been able to lower real interest rates enough.
He said it is "really a stretch to think" that the Fed has lowered rates too much.
In fact, considering high rates of unemployment and low levels of inflation, "I think what we're seeing is that we have not been able to lower rates as much as we'd like to," Kocherlakota said.
Although the Fed is believed to be on the verge of dialing back its large-scale asset purchases, Kocherlakota suggested the Fed will need to maintain a highly stimulative monetary policy for some time to come, although he did not explicitly oppose tapering.
He said the "natural interest rate has fallen" globally, as reflected in weak economic growth and low resource utilization and low inflation.
And Kocherlakota said this is "not a situation that is likely to resolve itself in the next few months of monetary policy" making "The macroeconomic forces that gave rise to a low natural rate of interest are likely to be with us for some time," he added.
Kocherlakota was speaking at a session chaired by Fed Vice Chairman Janet Yellen, who did not express her own views.
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