Dovish US Fed official says low inflation allows more easing

AMERICA’S ultra-loose monetary policy will not stoke inflation, one of the Federal Reserve’s most dovish senior officials insisted yesterday.

“Inflation remains weak, or very low by historical standards, by the goal of two per cent per year, so there is no reason to be afraid of monetary stimulus," said Narayana Kocherlakota, president of the Minneapolis Federal Reserve Bank.

Kocherlakota acknowledged that many Americans are affected daily by rising prices when they shop for basic goods while often coping with stagnant wages.

“Your eyes go to things that are expensive and maybe your wages haven’t been going up very much recently,” Kocherlakota said.

“[But] inflation is not just under control, it’s low relative to where we want it to be and that gives more room for monetary policy stimulus to be helpful.”