The Fed’s decision last week to start reinvesting cash from maturing mortgage bonds to buy more government debt — about $10 billion a month — should not be viewed as a sign the economic outlook is worse than investors thought, Minneapolis Fed President Narayana Kocherlakota said on Tuesday.
Reuters: “The FOMC’s decision [which took investors by surprise] has had a larger impact on financial markets than I would have anticipated,” Kocherlakota said in the text of speech to business leaders.
“My own interpretation is that the FOMC action led investors to believe that the economic situation in the United States was worse than they, the investors, had imagined,” he said. “In my view, this reaction is unwarranted.”
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