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Kocherlakota: Fed should be more agressive on inflation mandate

FXStreet (Bali) - President of the Fed of Minneapolis Narayana Kocherlakota, voting member this year, gave a speech on the 'objectives of monetary policy’.

The policymaker noted that "Fed can let inflation exceed 2% to lower the jobless rate", adding that " the Fed should link dual mandate to market stability."

Kocherlakota also mentioned that if inflation remains sub-2% too long, "it may affect expectation", adding that "a sub-2% inflation is as much a problem as above 2%."

Kocherlakota said that Fed should adopt 2-yr benchmark for inflation goal, making the 2% inflation goal a symmetric one.

Kocherlakota added: “Inflation persistently below the 2% target could create doubts in households and businesses about whether the FOMC is truly aiming for 2% inflation, or some lower number. This kind of unmooring of inflation expectations would reduce the effectiveness of monetary policy as a mitigant against adverse macroeconomic shocks.”

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