Fed can be both late and slow to raise rates: Kocherlakota

With the U.S. economy still years away from rising to normal levels of inflation and employment, the Federal Reserve can afford to wait until well into next year to raise interest rates, a top Fed official said on Tuesday. Counseling extraordinary patience on eventual rate hikes, Minneapolis Fed President Narayana Kocherlakota laid out a case for waiting until the second half of 2016 to start raising rates, and to then raise them gradually so as to reach just 2 percent by the end of 2017. Kocherlakota's view stands in contrast to the majority of his Fed colleagues, including Fed Chair Janet Yellen, who believe the Fed will need to start raising rates this year as the labor market improves and begins to put upward pressure on excessively low inflation. Some of the Fed's more hawkish policymakers have even pressed for a rate rise as early as June, warning that waiting too long could force the Fed to hike borrowing costs sharply to head off a potential surge in unwanted inflation.

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