Voting Fed Member Says Taper Came Too Soon

(RTTNews) - The Federal Reserve was too quick to scale back unprecedented stimulus at a time when unemployment remains above the central bank's target, a top official at the Fed argues.

Policy makers should be doing more to help the economy instead of tapering what is now a $75 billion a month bond-buying plan, according to Narayana Kocherlakota, president of the Minneapolis Federal Reserve Bank.

With respect to the Fed's dual goals of promoting employment and healthy inflation, the central bank "could do better with respect to both of its congressionally mandated objectives by adopting a more accommodative monetary policy stance," he said at a town hall event at the regional bank's headquarters.

His remarks came before this morning's mixed U.S. jobs report.

The report said non-farm payroll employment edged up by 74,000 jobs in December compared to economist estimates for an increase of about 200,000 jobs.

At the same time, however, the Labor Department said the U.S. unemployment rate dropped to 6.7 percent in December from 7.0 percent in November. The drop pulled the unemployment rate down to its lowest level since October of 2008.

The Fed has stated it will maintain drastic support for the economy until unemployment hits 6.5 percent, and that its benchmark interest rate will remain near zero for some time after that.

"By easing monetary policy relative to its current stance, the (Fed) could facilitate a more rapid fall in unemployment and more rapid return to 2 percent inflation," Kocherlakota said.

"I think we do have to be really careful about the process of slowing or reducing the monetary footprint," he added.

Kocherlakota did have a vote at the December meeting where the Fed cut its asset purchases from $85 billion to $75 billion per month. He rotates into a voting role for 2014.