The Federal Open Market Committee (FOMC) convened January 31–February 1 for their first meeting of 2017. Chaired by Janet Yellen, FOMC is the monetary policy-making branch of the Federal Reserve Board. Following the two-day meeting in Washington DC, the Federal Reserve’s policymakers have decided to leave interest rates unchanged.
In an appearance on Bloomberg News, Narayana Kocherlakota discusses the Federal Reserve’s decision, slack in the labor market, and why he thinks FOMC meetings need to be revived. Kocherlakota, the Lionel W. McKenzie Professor of Economics at the University of Rochester, is a former Minneapolis Federal Reserve Bank President and a Bloomberg View columnist.
Yellen will offer congressional testimony mid-February, which Kocherlakota expects will amount to her saying that:
[T]he Fed is waiting to see how the political uncertainty in Washington gets resolved in terms of what exactly does the new administration bring forward to Congress and what exactly does Congress implement.
In October 2016, Kocherlakota characterized the non-press-conference FOMC meetings as “dead.” This most recent meeting continues that trend.
Asked about whether people can expect wage inflation to go with President Donald Trump’s reflation trade, Kocherlakota answered:
My own perspective on that is that even though the unemployment rate is as low as it is […] you still see signs of slack. And I think until those employment numbers start to get back to where they were before the recession in 2007, we’re going to be living with relatively low rates of wage inflation.
View the video of Kocherlakota on Bloomberg News online.
