September 26, 2022

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Fed's Kashkari confident inflation can weaken, but not without pain

Fed’s Kashkari confident inflation can weaken, but not without pain

Neil Kashkari

Anjali Sundaram | CNBC

Minneapolis Federal Reserve Chairman Neil Kashkari On Monday, he said he was confident that inflation would return to normal even though it was taking longer than he had expected.

Acknowledging that he was working on a “transition team” in the belief that price hikes would not continue, he said persistent imbalances between supply and demand had led to Highest inflation levels in more than 40 years.

While the Fed’s monetary policy tools can help reduce demand, they can do little to get supply to keep up.

“I’m confident we’ll get inflation back to our 2% target,” he told CNBC.croak boxIn a direct interview. But I’m not yet sure how much of this burden we will have to take in exchange for supply-side assistance. “

His comments come less than a week after the Federal Open Market Committee sets the interest rate Raising the standard rates half a percentage point. The 50 basis point increase was the largest in 22 years and sets the stage for a series of moves of similar size in the coming months.

Although Kashkari has historically favored lower rates and looser monetary policy, he voted for both increases this year as necessary to control spiraling prices. He noted, however, that the burden of policy tightening would fall on those at the lower end of the wage spectrum.

“It is lower-income Americans who are most penalized by these escalating rates, yet your policy tools to lower inflation directly affect those lower-income Americans as well, either by raising the cost of getting a mortgage…or if we have to do too much. Until the economy goes into recession.” “It is their jobs that are most likely at risk.”

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“So I think this is a tough challenge for all of us, but we also know that allowing inflation to stay at these very high levels, it’s not good for anyone and it’s not good in the long run for the economy for anyone’s potential across the income distribution.”

On Wednesday, the government will release its latest data on consumer prices, followed by producer prices for April on Thursday.

Economists expect the pace of inflation to ease slightly in April, with the core CPI likely to show an increase of 8.1% over the past year, and 6% excluding food and energy, according to Dow Jones estimates. That compares with March gains of 8.5% and 6.5%, respectively.

These kinds of numbers provide some relief to Kashkari, though he said conditions remain challenging as long as the imbalances between supply and demand persist.

“We just need to keep paying attention to the data,” he said. “Some of the newer inflation data by some measures is a little weaker than we thought it might come. So maybe there is some evidence that things are starting to soften. But we just need to keep paying attention to the data and see where it comes in before we can extract any conclusions”.