Federal Reserve Bank of Minneapolis President Narayana Kocherlakota reasserted his defense of the central bank's decision to buy $600 billion of Treasuries through June, and said officials have enough resources to combat any future inflation pressures.
The decision to engage in further quantitative easing "is a move in the right direction," he said in the text of a speech Tuesday in St. Paul, Minnesota. The speech was similar to one he gave Nov. 18 in Chicago.
Kocherlakota is defending a central bank move that's drawn criticism from Republican lawmakers, officials in China, Germany and Brazil, and some Fed policy makers. He discounted the view that the creation of excess reserves would kindle "some future inflationary fire."
"I did express support for the FOMC's decision at the recent meeting," Kocherlakota said in the speech at Hamline University. Even so, "there are good reasons to suspect that the ultimate effects of any amount of QE are likely to be relatively modest."
At the Federal Open Market Committee's Nov. 3 meeting, policy makers agreed to adjust the purchases "as needed," while leaving in place their pledge to keep interest rates low for "an extended period."
Minutes of the gathering, released last week, show that officials disagreed over whether to expand the record monetary stimulus, with a minority concerned about risks to inflation and the dollar. The round of purchases announced this month follows a previous $1.7 trillion bond-purchase program. Economists call the strategy quantitative easing because it aims to increase the quantity of bank reserves.
Republican lawmakers, such as Senator Bob Corker of Tennessee and Representatives Mike Pence from Indiana and Paul Ryan of Wisconsin, are calling for the Fed to focus solely on controlling inflation. John Boehner, the presumptive House speaker, is among those also concerned that the central bank's policies risk weakening the dollar and fueling asset bubbles.
The 47-year-old regional Fed chief has led the Minneapolis Fed since October 2009 and will vote on the FOMC for the first time next year.