Stocks Are Falling

Stocks are falling this afternoon.

The sell-off, albeit modest, has picked up in the last few minutes for no obvious reason.

Minneapolis Fed President Narayana Kocherlakota is speaking in Minnesota right now.

The dovish Fed official is reiterating his endorsement of a lower unemployment rate threshold to guide monetary policy.

“In previous speeches, I’ve recommended that the FOMC announce its intention to keep the fed funds rate extraordinarily low at least until the unemployment rate falls below 5.5 per cent [instead of 6.5 per cent], as long as the one-to-two-year-ahead outlook for the inflation rate stays below 2.5 per cent,” he said. “A recent working paper by senior Board of Governors staff suggests that this policy stance could indeed have material benefits in terms of the evolution of prices and employment.”

If this idea gains traction, we could see loose monetary policy for longer.

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