WASHINGTON (Reuters) - a Senior Federal Reserve said it would put bar "very high" for the Bank to stop short in its planned 600 billion in purchases of binding, but that the Fed may need to start account a reversal of the policy by the end of the year.
"The bar is very high for me", Kocherlakota says in an interview with the Wall Street Journal, published Monday. "It should be a haphazard response any in expectations of inflation or the behavior of the dollar."
"We are talking about relatively extreme", he said.
Kocherlakota, which turns into a slot vote this year, Fed policy panel says he threw his support behind the bond purchase plan after colleagues argued with conviction that policy would move monetary policy in the right direction, even if it would not have a big impact.
He told the Wall Street Journal, he did not know if the Fed could stop before purchasing the full $ 600 billion or eventually buy more. He said, however, he would have supported the program even if he had known that economy would be a bit stronger that it had been forecasting.
Kocherlakota says he expects that the U.S. economy to grow by 3 to 3.5% this year, with approximately 1.5 to 2% of the rising inflation.
He said he expects that the unemployment rate U.S. decrease 9 percent at the end of the year, but remain above 8% by 2012.
The head of the Minneapolis Fed reiterated its argument that structural changes in the economy had probably raised the measured unemployment level that would be sustainable without generating junk inflation.
He said that the unemployment rate which may trigger inflation is probably in a range of 6.5 to 8%, well above the 5% to 6% of output in November Fed forecasts suggest is most widely held view among policymakers.
He said it wasn't an immediate concern of politics, but it could become a review at the end of the year. The Government said Friday that the unemployment rate dropped to 9.4% month last of 9.8% in November.
"At this moment, the debate on what is the level of structural unemployment is somehow - I don't mean uninteresting - but is not immediately relevant for policy considerations,"Kocherlakota says. "
He said: "if things go as I if expected, I think it will be really important towards the end of the year, towards the end of 2011, to have a notion of what is this level of structural unemployment;
"If the number is 8 p. 100 [...]" in my forecast unemployment will be approximately 9 towards the end of 2011 and inflation is at 1,5%... "This is the point where you might think to output", added Kocherlakota.
The Fed has held benchmark overnight rates close to zero since December 2008. After pressing the rate close to zero, it bought 1.7 trillion dollars in mortgage-focused and Government bonds. Then, in November, he launched the latest $ 600 billion to purchase the bond program, which sparked strong criticism.
Kocherlakota, said that the reaction against the program has not changed its calculation of the costs of the scheme, that he called relatively low.
(Reporting by Tim Ahmann, Chizu Nomiyama mounting)
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