Falling real rates put US ‘at risk of financial instability’, says Kocherlakota

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Narayana Kocherlakota

US long-run real interest rates in conditions of full employment have seen a "notable decline" over the last decade, increasing the threats to the economy, Federal Reserve Bank of Minneapolis president Narayana Kocherlakota said in a speech on August 19.

Policy-makers need to drive the cost of debt down, Kocherlakota told an audience at the Bank of Korea conference in Seoul. If they do not, they risk financial instability and monetary policy stranded at the lower bound.

Kocherlakota defined the

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