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Minneapolis Fed chief: Oil price drop good for economy, consumers

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Narayana Kocherlakota and Chris Farrell
Narayana Kocherlakota talks oil, employment and interest rates during a wide-ranging public forum Thursday, Jan. 8, 2014. The forum was moderated by Marketplace economics editor Chris Farrell.
Matt Sepic / MPR News

The drop in oil prices is good for the overall economy — and consumers, the president of the Federal Reserve Bank of Minneapolis says.

Narayana Kocherlakota talked oil, employment and interest rates during a wide-ranging public forum Thursday night. 

The Minneapolis Fed president, who has a reputation as a dissident among Fed watchers, said the economy is no doubt improving but countered that the jobless rate may have dropped faster had the central bank not started phasing out its stimulative bond-buying program known as quantitative easing. 

He again urged his Fed colleagues not to raise interest rates, saying that keeping borrowing cheap will continue to deliver much-needed stimulus to the economy without generating undue inflation. 

Here in Minnesota, where unemployment is a relatively low 3.7 percent and demand for labor is higher, wages remain surprisingly stagnant. But Kocherlakota said worker pay is likely to go up, pushing up overall prices as well. 

"Eventually conditions will improve sufficiently that we should see the demand for labor pushing up on wages, and that will I think also start to trickle into inflation," he said.

Nationally, the unemployment rate dropped to 5.6 percent in December. 

Kocherlakota announced last month that he'll step down after his term ends in February of 2016.