Kocherlakota Warns U.S. Could Follow Japan and Europe

Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the U.S. central bank risked damaging its credibility by communicating an intention to shift toward tighter policy amid a subdued inflation outlook.

Policy makers’ “failure to respond to weak inflation runs the risk of creating a harmful downward slide in inflation and longer-term inflation expectations of the kind that we have seen in Japan and Europe,” Kocherlakota said today in a statement.