TWO LEADING officials at the US Federal Reserve set out dramatically different views on monetary policy yesterday, highlighting the division among policymakers at the central bank.

In an interview with CNBC, Charles Evans, Chicago Fed president, said he would “favour more accommodation” and argued that a short-term rise in inflation to 3 per cent was acceptable.

That contrasted with comments by Narayana Kocherlakota, president of the Minneapolis Fed, who said in a speech that the Fed could “lose control of inflation” if monetary policy is too loose, forcing it to jack up interest rates at a cost to future employment.

Their opposite viewpoints demonstrate the difficulty Ben Bernanke, Fed chairman, will face in forging a consensus when the rate-setting Federal Open Market Committee meets on September 20th to 21st to discuss its options for more monetary policy easing.

Mr Evans and Mr Kocherlakota were speaking ahead of the publication of minutes from the Federal Open Market Committees (FOMC) August meeting, which forecast that interest rates would stay low until mid-2013. Mr Evans voted for – and Mr Kocherlakota voted against – that decision.

The minutes showed that a few Fed policy makers favoured more aggressive action to stimulate the economy and lower unemployment. Those members, who were not identified, “felt that recent economic developments justified a more substantial move” beyond the pledge adopted at the August 9th meeting.

Mr Evans is the first FOMC member to countenance inflation above the Fed’s 2 per cent target, which Mr Bernanke has strongly resisted. – (Copyright The Financial Times Limited/ Bloomberg)