Though he does see a recovery, he\u0092s not terribly optimistic about the economy outlook. Here are a few key points:<\/p>\n
- \n
- He is below the consensus forecast among Fed officials for around 3.5% annual economic growth for the next two years, projecting gross domestic product to expand at an annual rate of 3%. He\u0092s got three reasons for the pessimism: 1) The Minneapolis Fed\u0092s internal forecasting computer model is below consensus, with a 2.5% forecast; 2) He believes Washington is creating uncertainty for businessmen with ever-changing proposals for financial and health care regulation. \u0093I see this kind of political uncertainty as problematic for the prospects of rapid recovery;\u0094 and 3) The banking sector faces ongoing problems, including commercial real estate.<\/li>\n<\/ul>\n
- \n
- The job outlook is bleak. \u0093I would be highly surprised if unemployment were below 9 percent by the end of 2010 or below 8 percent by the end of 2011 \u0085 to get a true expansion in employment and in the economy, the hiring rate has to pick up\u0097and we have yet to see evidence that it will do so in the immediate future.\u0094<\/li>\n<\/ul>\n
- \n
- He\u0092s not worried about inflation, where the news is \u0093mostly good.\u0094 That\u0092s not sure to last, he says. The combination of money pumped into the financial system by the Fed and big deficits run by the federal government could cause inflation to get unanchored, but he thinks that\u0092s unlikely.<\/li>\n<\/ul>\n
In all, in his first public comments, Mr. Kocherlakota doesn\u0092t sound like he\u0092s going to veer very far from the consensus at the Fed to keep interest rates near zero for at least several more months.<\/p>\n
He also offers up an articulate defense of the Fed as a regulator. Mr. Kocherlakota argues that because the Fed is lender of last resort to banks when they face a cash crunch, it needs to know the health of firms to which it might be lending in a crisis. If Congress strips it of the power to supervise banks, it loses its ability to distinguish between healthy banks it ought to save and doomed banks that don\u0092t deserve a loan.<\/p>\n
Instead, it would have to depend on some other regulator for information, and the other regulator might not have an incentive to give the Fed a clear picture. \u0093This other agency is not going to suffer a loss for making a bad loan\u0097the Federal Reserve is.\u0094 In other words, stripping the Fed of its ability to regulate banks would set up bad incentives among regulators when the next crisis hits.<\/p>\n
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The Federal Reserve\u0092s newest official sounded a bearish note on the economy today and offered a novel case for preserving the Fed\u0092s role as a bank regulator. Narayana Kocherlakota became president of the Federal Reserve Bank of Minneapolis in October. He\u0092s mostly been keeping his head down since then as he settled into his seat […]<\/p>\n","protected":false},"author":850,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-329010","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/329010","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/850"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=329010"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/329010\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=329010"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=329010"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=329010"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
- He\u0092s not worried about inflation, where the news is \u0093mostly good.\u0094 That\u0092s not sure to last, he says. The combination of money pumped into the financial system by the Fed and big deficits run by the federal government could cause inflation to get unanchored, but he thinks that\u0092s unlikely.<\/li>\n<\/ul>\n
- The job outlook is bleak. \u0093I would be highly surprised if unemployment were below 9 percent by the end of 2010 or below 8 percent by the end of 2011 \u0085 to get a true expansion in employment and in the economy, the hiring rate has to pick up\u0097and we have yet to see evidence that it will do so in the immediate future.\u0094<\/li>\n<\/ul>\n