Fed’s Kocherlakota Says Asset Prices Can Be Future Signal
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Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said central bankers should use probabilities of outcomes derived from financial-market prices in their policy making.
“Policy makers need some way to gauge the relative likelihood of future events,” Kocherlakota said today in slides prepared for a speech in New York. “For policy makers that care about social welfare, the relevant probability is a risk-neutral probability.”