By Suzanne Cosgrove

CHICAGO (MNI) – Minneapolis Federal Reserve Bank President Narayana
Kocherlakota late Saturday said members of the Federal Reserve’s
policymaking committee hold varying views “on what inflation looks
like,” but stressed that a 2% rate remains the target.

Speaking to a meeting of the Midwest Economics Association,
Kocherlakota reiterated in prepared remarks his point made earlier this
month that there are limits to what the Fed can achieve on its own to
reduce to reduce unemployment.

Kocherlakota in a March 20 speech that used the same econometric
models that he discussed Saturday said the Fed can, by lowering the real
interest rate, influence demand for goods and services and indirectly
help reduce unemployment in that way. But it has much less impact on
demand for labor.

In addition, he noted in his presentation Saturday that the Fed’s
models look at both real and nominal wages, but it is not always obvious
what the impact of inflation will be on real wages.

Kocherlakota was one of three Federal Reserve Bank presidents who
dissented against easing measures adopted by the Fed’s policymaking
Federal Open Market Committee last August and September.

Taking a question from the audience about the impact of rising gas
prices on inflation models, Kocherlakota acknowledged that it is
important how people’s expectations factor into their response to higher
prices, but when pressed by MNI for his on response to the “stickiness”
of the data, he said he had no comment.

** MNI Chicago Bureau **

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