Just two weeks before the US federal reserve announces his policy decision, Minneapolis Fed President Neel Kashkari has reportedly voiced his hawkish stance and said stopping the rate hike campaign makes no sense if inflation keeps rising.
The Federal Reserve cannot suspend its tightening campaign once its benchmark interest rate hits 4.5% to 4.75% if “underlying” inflation is still picking up, Kashkari said according to to a Bloomberg report.
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core inflation: During a panel discussion of the Women Corporate Directors Minnesota Chapter On Tuesday he said: “Core services inflation – which is the most difficult of all – continues to rise and we keep getting surprised from above.”
“If we don’t see any progress on underlying inflation or core inflation, I don’t see why I would advocate stopping at 4.5 or 4.75 or something like that,” argued Kashkari.
Price promotion: Stocks and bonds alike have been hit by the Fed’s aggressive rate action and forecasts of its future policy stance. That SPDR S&P 500 ETF Trust SPY has lost over 24% since the beginning of 2022, while the Vanguard Total Bond Market Index Fund ETF BND has lost over 15% over the same period.
Based on futures contract prices, investors are currently anticipating a peak rate of around 4.9% early next year. The Minneapolis Fed chairman, known as the Fed’s most outspoken dove before the COVID-19 pandemic, has become the institution’s biggest hawk this year, the report said.
“This inflation did not come from the labor market. This inflation came from supply chains, energy and commodities,” Kashkari said.
Continue reading: Why the Fed must ‘break the labor market’ to avoid a ‘wage-price spiral’
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