Reuters: Economic News: Fed can rein in inflation when needed: Kocherlakota

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Fed can rein in inflation when needed: Kocherlakota Mar 20th 2012, 22:40 ST. LOUIS | Tue Mar 20, 2012 6:40pm EDT ST. LOUIS (Reuters) - The Federal Reserve has the tools to keep inflation under wraps despite the huge increase in its balance sheet in recent years, a top Fed official said on Tuesday. "The Fed can rein in inflation by raising interest rates at the appropriate time," Minneapolis Fed President Narayana Kocherlakota said in answer to an audience question after a speech at Washington University in St. Louis. Rather than simply raising its target policy rate, he said, the Fed will do so by raising the interest it pays on excess reserves held by banks. Kocherlakota also said he sees the unemployment rate, now at 8.3 percent, falling slightly below 8 percent this year and to the "low sevens" by the end of next year.

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