Regional President Speech

Operational Implications of the FOMC’s Principles Statement Narayana Kocherlakota President Federal Reserve Bank of Minneapolis

January 2012 Principles Statement  Statement describes core Committee principles.  Important: 2 percent inflation target.  Reaffirmed in January 2013, with broad FOMC support.  My talk today: how to operationalize these commonly held FOMC principles.

Paragraph 5 of Principles Statement mitigate deviations of inflation from The Committee seeks to its longer-run goal and deviations of employment from the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate.

Single Mandate Outlook appropriate inappropriate * 8 12 time (quarters)

Paragraph 5 of Principles Statement deviations of inflation The Committee seeks to mitigate from its longerdeviations of employment run goal and from the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not balanced approach complementary, it follows a in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate.

Dual Mandate Outlook balanced not balanced * 8 12 time (quarters) u u* 8 12 time (quarters)