Kocherlakota Backs Fed, Says Inflation Risk Overblown
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Federal Reserve Bank of Minneapolis President Narayana Kocherlakota defended the central bank’s program to buy $600 billion of bonds, saying criticism it will cause a surge in inflation is misplaced.
“This basic logic isn’t valid in current circumstances,” because banks already have about $1 trillion in excess reserves, Kocherlakota said in the text of remarks in Chicago today. The creation of more reserves through bond purchases won’t be “‘kindling’ for some future inflationary fire,” he said.