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UPDATE 1-Fed's Kocherlakota: 'I regret my lack of persuasiveness'
May 28, 2015 / 8:58 PM / 2 years ago

UPDATE 1-Fed's Kocherlakota: 'I regret my lack of persuasiveness'

* Kocherlakota has wanted easier policy than colleagues since 2012

* ‘I hope they are right, and I am wrong,’ he says

* Plans retirement in early 2016 (Adds comments, details)

HELENA, Montana, May 28 (Reuters) - Minneapolis Federal Reserve President Narayana Kocherlakota on Thursday said he was disappointed that he has been unable to convince his colleagues to keep monetary policy as easy as he thinks it should be, and delay raising rates until 2016.

“I regret my lack of persuasiveness. I think we would have better policy if I were more persuasive than I have been able to be,” Kocherlakota told reporters after his speech here.

If the Federal Reserve raises rates this year, as most of his colleagues expect, “things could go okay, but you are creating a risk of further declines in where market-based inflation expectations are, basically to the credibility of our inflation target, and I think you are creating downside risks our pursuit of our employment mandate.”

Kocherlakota, who plans to leave his job early next year in search of “other opportunities,” began his tenure at the Minneapolis Fed in late 2009, and in short order began arguing the Fed should think about normalizing policies in response to improving economic conditions.

By September 2012, however, he had changed his tune, convinced by mounting research that the Fed needed to promise more time at near-zero rates for households and businesses to start spending more freely. He rapidly became the Fed’s most outspoken dove, advocating that the Fed promise to keep rates low until the unemployment rate, then at 8.1 percent, dropped at least as low as 5.5 percent.

He lost that argument to colleagues who thought that threshold was too aggressive and could fuel too much inflation. Last month, the U.S. unemployment rate dropped to 5.4 percent, and inflation has lingered below 2 percent for three years.

“None of the awful risks that people were worried about have transpired,” he said on Thursday. “I wasn’t persuasive then, I am not as persuasive now, I wish I were more persuasive ... my own perspective is we would be in better shape if I were able to. On the other hand, I hope they are right and I am wrong.” (Reporting by Ann Saphir; Editing by Meredith Mazzilli)

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