“I am slightly more upbeat,” Kocherlakota said today in an interview on CNBC television.
The regional Fed chief’s comments aligned with the Dec. 13 statement by Chairman Ben S. Bernanke and the Federal Open Market Committee, which said the U.S. economy “has been expanding moderately” compared with the Nov. 2 assessment that growth “strengthened somewhat.” Kocherlakota supported the Fed’s decision this month to refrain from further easing.
“One of the things that gives me pause about doing more accommodation at this time is a lot of measures of slack right now look fairly consistent with what they looked like seven years ago in mid-2004,” Kocherlakota said, referring to measures of hours per worker and capacity utilization.
“The one metric that looks very different, of course, is the unemployment of those who have been unemployed more than six months,” Kocherlakota said. “That means, if we use more accommodative policy, we’re trying to use it to lower the long- term unemployment rate.”
The Labor Department reported Dec. 2 that the unemployment rate in November fell to 8.6 percent from 9 percent the previous month. The portion of jobless workers who have been unemployed for more than half a year was 43 percent, down from a peak of 45.6 percent in May 2010. Following the 2001 recession, long- term unemployment peaked at 23.6 percent.
Fallout From Crisis
Kocherlakota said additional fallout from the European sovereign-debt crisis could require Fed action if the outlook for inflation began to fall and unemployment rose.
“If my inflation forecast was to soften below where we were in the fall and unemployment was to rise above where we were, that would be an argument for further accommodation, certainly,” he said.
Kocherlakota, 48, has led the Minneapolis Fed since October 2009. He dissented from a Fed pledge in August to keep interest rates near zero through mid-2013 and a decision in September to sell $400 billion of short-term Treasuries and buy $400 billion of longer-term securities, known as Operation Twist. Kocherlakota said today that economic circumstances have improved -- not worsened -- over the past year.
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