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Dave Olson, Published April 15 2014

Fed official says low interest rates are good for the economy

FARGO – The head of the Federal Reserve Bank of Minneapolis said Tuesday that calls to ease Fed policies aimed at keeping interest rates low are potentially damaging to the economic recovery.

“That’s a very dangerous conversation,” said Narayana Kocherlakota, who spoke at a news conference in Fargo prior to a talk he planned to give at a town hall meeting Tuesday night hosted by North Dakota State University.

Kocherlakota said that for now, the Fed is committed to staying on its current course of keeping interest rates low, including a policy that keeps the interest rate on inter-bank borrowing at near zero percent.

By doing a good job of communicating that commitment, he said the Fed can help keep the recovery on track.

“That will give people confidence that the recovery will be more rapid and that in itself is a form of stimulus, Kocherlakota said.

He added that in talking with people in Fargo, it is clear residents feel the local economy is strong and people have a lot of confidence in it.

But there also appear to be challenges, he said.

“There’s a demand for workers and those workers need places to live,” he said.

Addressing some of his remarks to students who will soon graduate from college, Kocherlakota said they should not consider this commencement to be their last, stressing that education and continuing education are the keys to long-term success in the U.S. economy.

He said oil is now very important to North Dakota’s economy, but that will not always be the case.

“The question is how to use the oil benefits now to put yourself in a better position to be a part of that (future) economy down the road.

“Things continue to change,” Kocherlakota said. “Keep yourself open to educating yourself about those changes.”


Readers can reach Forum reporter Dave Olson at (701) 241-5555