Here is Narayana Kocherlakota's explanation for his dissent with respect to the most recent FOMC decision. As I mentioned in the comment section of my previous post, Kocherlakota actually has some New Keynesian (NK) leanings, and his dissent is entirely consistent with an NK view of the world. In this view, a Taylor rule dictates monetary policy. In Taylor-rule land, only the current state of the world, defined by the current inflation rate and the current unemployment rate, matters (though some Taylor rules have anticipated inflation on the right-hand side). On those terms, the current state actually looks better than the state in November 2010. Inflation is higher and unemployment is lower, which should dictate a less accommodative policy, not a more accommodative one.
Thus, if we buy NK, Kocherlakota's dissent makes sense. However, this guy, for example, seems to think that Kocherlakota is ridiculously hawkish and callous toward the unemployed. Seems he just wants to enforce New Keynesian consistency though.
I live in non-NK land (or willing-to-be-convinced-but-still-unconvinced-NK-land), so if Kocherlakota's dissent makes sense to me, and it can make sense in NK-land, it must be good, right?
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