The Federal Reserve should not hike short term rates this year because it would slow the return of inflation to the central bank's target and also risk a loss of credibility for the U.S. central bank, said Narayana Kocherlakota, the president of the Minneapolis Fed, on Tuesday. Kocherlakota, the most ardent dove on the Fed and a non-voting member of the Fed policy committee this year, said he thinks it will already take inflation a few years to return to the Fed's 2% annual target rate from current low level. "Raising the target range for the fed funds rate in 2015 would only further retard the pace of the slow recovery in inflation," Kocherlakota said in a speech to the Minnesota Bankers Association. A rate hike "would also increase the risk of a loss of credibility, in the sense that the public could increasingly perceive the FOMC as aiming at a lower inflation target," he added.
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