Financial markets are wrong to view the Federal Reserve as having become more hawkish in its views on the need to tighten monetary policy, Minneapolis Federal Reserve President Narayana Kocherlakota said on Monday.
“I was concerned about the strong reaction…to the committee’s communication. I thought there was a sense out there…that the committee had taken more of a hawkish turn, in terms of thinking about policy… I thought that was a mis-perception that should be clarified,” he told reporters in a conference call, explaining why he was holding the call.
Kocherlakota, who is not a voting member of the policy-setting committee this year, was referring to the reaction to comments that Fed Chairman Ben Bernanke’s made during a press conference on Wednesday, in which he said the Fed expected to begin slowing the pace of its bond purchases later this year.
Kocherlakota said “thus far” the rise in bond yields was not a cause for concern, but warned that if higher yields hardened over time, that could subtract demand away from the economy.