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Fed dissenter says policy action was a mistake

March 21, 2014

WASHINGTON (AP) — A Federal Reserve official who dissented from this week’s policy decision says the Fed should have outlined a plan to keep a key interest rate at a record low until unemployment falls below 5.5 percent.

The Fed’s policy statement no longer cites a specific unemployment rate that might lead it eventually to raise short-term rates. The Fed instead says it will monitor a range of information before approving any rate increase.

Narayana Kocherlakota, president of the Fed’s Minneapolis bank, says this shift, approved 8-1, will foster uncertainty.

In a statement Friday, Kocherlakota says lowering the threshold for considering a rate hike from 6.5 percent unemployment to 5.5 percent would have enhanced the Fed’s commitment to low rates until inflation nears its 2 percent target. The unemployment rate is 6.7 percent.

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