Narayana Kocherlakota Defects to Team Doves

Minneapolis Federal Reserve President Narayana Kocherlakota has been one of the big inflation hawks on the Federal Reserve for a while now. What’s more, of the skeptics of monetary easing he’s been by far the most intellectually sophisticated. And now he’s showing off that depth of knowledge by changing his mind and endorsing a scheme for monetary stimulus.

What he’s putting on the table is basically a modest version of Charles Evans’ plan. Kocherlakota says the Fed should promise to keep rates at zero until unemployment goes all the way down to 5.5 percent unless inflation gets up to 2.25 percent. That superficially sounds more dovish than Evans’ position since it has a much more aggressive unemployment target, but it’s really pretty modest since that’s still a very low inflation ceiling. I’d much rather see the Fed ease up on inflation to the tune of 3 or even 4 percent even if that means you need a more modest employment target.

Still, given Kocherlakota’s standing and previous positioning this represents a huge turnaround and you can see that whatever internal politicking Ben Bernanke is engaged in is bearing fruit.