Mpls. Fed President Wants Interest Rates Raised

Narayana Kocherlakota is in the minority in arguing that the Fed should start tightening credit to guard against inflation, but he's been vocal with his opinion.

The leader of the Federal Reserve Bank of Minneapolis drew headlines recently after announcing that it would be “desirable” to raise interest rates this year.

Minneapolis Fed President Narayana Kocherlakota, who votes on monetary policy, has been vocal in his opinion that the Fed will need to start tightening credit to guard against inflation.

“Under my baseline forecast, it would be desirable for the [Federal Open Market Committee] to raise the fed funds target interest rate by a modest amount toward the end of 2011,” Bloomberg reported Kocherlakota saying in a Thursday speech in Santa Barbara, California.

Specifically, Kocherlakota wants the Fed to raise its key interest rate by one-half percentage point. He argues that even with the boost, rates will still be low when compared to historical standards.

Since December 2008, the Fed has kept interest rates between zero and 0.25 percent-which represent historic lows-in an attempt to nurture economic recovery.

Kocherlakota said he expects the economy to grow at a “disappointing” rate of 3 percent to 3.5 percent this year, according to Bloomberg.

Kocherlakota took the helm at the Minneapolis Fed in October 2009.