The Federal Reserve system’s top monetary policy “dove” announced Friday that he would be stepping down at the end of his term.
Federal Reserve Bank of Minneapolis president Narayana Kocherlakota announced Friday that he had informed the bank’s board that he would not seek reappointment when his current term runs out in early 2016.
“I became president of the Minneapolis Bank in October 2009 so that I could be of service to my country in an economic emergency. I have been honored to play a role in shaping the response to that dire situation. While challenges lie ahead for the Federal Reserve System, the state of crisis has passed,” Kocherlakota said.
His announced resignation means that his vote at next week’s meeting of the Fed’s monetary policy committee will be his last, as he is set to rotate out of the group of regional bank presidents with votes next year.
It also means that the Federal Reserve System will lose out on years of his influence as the member most eager to use the Fed’s tools to loosen money through low rates and bond purchases.
As recently as October, Kocherlakota dissented from a monetary policy decision reached between Chairwoman Janet Yellen and other member’s of the Federal Open Market Committee on the grounds that the central bank was doing too little to stimulate the economy. Kocherlakota has pushed for the Fed to use its recession-era stimulus tool and avoid normalizing policy until inflation is firmly at the Fed’s 2 percent target.
Kocherlakota could have continued serving at the Minneapolis branch for an additional 14 years, because of the lax rules on regional bank president tenure. He is only 51 years old, having moved through the central banking profession at an accelerated pace, starting with his matriculation to Princeton University at age 15.
Instead, his tenure will end up relatively brief by Fed standards. It will be marked by his notable transition from one of the most “hawkish” members, eager to raise rates and clamp down on rising inflation, to one of the most dovish. That process was aided in part by the efforts of former chairman Ben Bernanke to convince Kocherlakota of the need for the round of quantitative easing that began in 2012 to stave off a double-dip recession in the U.S.
His time at the Minneapolis Fed was also marked by unusual controversy. Last year, two top researchers left the bank under suspicions that they had been forced out over philosophical disagreements with Kocherlakota.
Kocherlakota did not give an indication of what his future plans might hold, but his services will be in high demand in the private sector and in academia. Prior to joining the Fed, he was a professor of economics at the University of Minnesota and the chair of its economics department.
