Minneapolis Fed President Neel Kashkari said on Tuesday that his biggest concern is that the Federal Reserve has misinterpreted the extent and duration of price pressures, which might lead to more Aggressive interest rate hikes, at present, the Fed clearly needs to continue to tighten monetary policy until inflation falls from its highs.
“My biggest fear is that if we’re wrong and the market is wrong and inflation is much higher than we realize, the central bank will have to be more aggressive, and probably for a longer period of time,” he said. It will take time for inflation to come down.”
Kashkari believes that with an inflation rate of 4%, the Fed has the ability to slow down the pace of interest rate hikes and ensure that the U.S. economy will not fall into a downturn due to excessive interest rate hikes, but for now, the Fed clearly must continue to pay. tight policy. Kashkari does not have a vote in decision-making this year.
The current federal funds rate range is 2.25-2.50%. Kashkari expects the Fed to raise rates by another 2 percentage points by the end of next year. Before the outbreak, Kashkari had been the most vocal dove among Fed officials, but now he has turned his back on his stance and has become one of the most hawkish officials.
Earlier this month, the U.S. consumer price index (CPI) rose 8.5% in July from a year earlier. Although it cooled from the previous month and fell short of market expectations, it was still near a 40-year high.
Fed Chairman Jerome Powell is due to speak at the central bank’s annual meeting in Jackson Hole this week, and his remarks are expected to reset financial markets’ expectations for the future path of interest rates.
