Fed Kocherlakota Warns Rising Rates With Low Inflation Undermines Credibility

The U.S. Federal Reserve should be wary of raising rates while inflation is running below its 2-percent goal, because doing so could undermine its credibility and unmoor inflation expectations, a top Fed official said on Monday.
“I think we need to be very cautious and careful about starting to raise rates, because we do want to be sure that inflation is on the path back to 2 percent,” Minneapolis Fed President Narayana Kocherlakota told the Economic Club of Marquette County in Michigan’s Upper Peninsula.

Boosting rates too early could lower inflation further, undermining the public’s belief that the Fed is serious about its inflation target and raising the threat of a debilitating bout of falling prices.
Imposing a two-year deadline on reaching the Fed’s inflation target would be helpful because it would help bring unemployment down faster, Kocherlakota added.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza