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Kocherlakota: Fed didn't cause housing bubble (!?)

Kocherlakota: Fed didn't cause housing bubble (by Steve Goldstein)

WASHINGTON (MarketWatch) -- Minneapolis Fed President Narayana Kocherlakota on Tuesday defended the Federal Reserve from charges it caused the housing bubble, noting that land prices started to rise in 1996 and that prices grew 11% per year between 1996 and 2001, when the Fed's target rate was between 4.75% and 6.5%. "This is hardly considered to be loose monetary policy, especially given that the economy was entering recession toward the end of this period," he said, adding he was "agnostic" on what did cause the bubble. Kocherlakota, who wasn't on the Fed during the house price bubble and now is a voting member of the Federal Open Market Committee, also said that if the Federal Reserve didn't increase the monetary base, real GDP would have fallen by even more than 4% and unemployment would have been well above 10% during the most recession. Kocherlakota added 2011 economic growth would top 2010 but be closer to 3% than 4%. He expects core inflation to run between 1.5% and 2% by the end of the year.

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Kocherlakota: Fed didn't cause housing bubble (!?)