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Investing.com – Tuesday was a packed day of important announcements on the outlook for monetary policy, inflation expectations and the coming period, as Neil Kashkari and Austin Goolsby spoke, as well as Patrick Harker.
In his latest remarks, Minneapolis Federal Reserve Chairman Neel Kashkari indicated that a recession is likely this year.
Meanwhile, a member of the US Federal Reserve Bank in Chicago, Austin Goolsby, stressed, yesterday, Tuesday, the need to exercise caution before raising interest once more due to recent developments in the US banking sector.
These comments come ahead of CPI inflation data which is likely to have softened further in March. But core inflation, which excludes food and energy prices, is expected to remain stubbornly high, which might lead to higher price pressures more broadly.
The Fed pledged to continue raising interest rates to curb rising inflation. The minutes of the latest central bank meeting, scheduled for Wednesday, are expected to shed more light on this idea.
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inflation target
Also on Tuesday, Kashkari said that higher interest rates and a slowdown in lending following the collapse of many US banks might lead to a possible recession this year. But he also saw that allowing inflation to remain high would be worse than a recession.
He continued, “I see that inflation will reach 3% by the end of this year, and it will be close to the level of 2% next year.”
He added, “The US Federal Reserve’s inflation target of 2% should not be changed, claiming that this target has been instrumental in promoting economic stability in the US.”
Neal continued: “The entire American banker is not suffering from the risks that led to the collapse of the Silicon Valley bank, which is a clear indication that the banking system is operating in a more stable and sustainable way.”
Interest rate warning
A member of the US Federal Reserve Bank in Chicago, Austin Goolsby, stressed the need to exercise caution before raising interest rates once more due to recent developments in the US banking sector.
Austin Goolsby pointed out the need for the US Federal Reserve to assess the potential impact of financial pressures on the real economy, and that US Federal Reserve members should collect more information and be careful regarding raising interest rates excessively, in order to see the size of the repercussions of the US Federal Reserve’s tightening monetary policy in reducing inflation.
The importance of the data
Also on Tuesday, Philadelphia Fed member Patrick Harker said the central bank will continue to look closely at available data to determine any additional actions it may need to take.
Harker said: “The US Federal Reserve’s actions have begun to bear fruit and we see remarkable signs of that.” “It can take 18 months to feel the full impact of monetary policy measures,” he said.
Patrick also noted that the US Federal Reserve is fully committed to reaching its 2% inflation target, although recent readings of inflation show that it is slowly declining.
He also confirmed that the US Federal Reserve is not yet done with monetary tightening, but has only slowed down. Pointing out that the time is not right to change the inflation target of the US Federal Reserve.
He added, “The US Federal Reserve needs to reach interest rates higher than 5%, and stay at these levels until inflation is controlled and the desired goal is reached.”
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