Minneapolis FED President Neel Kashkari said today that the surprising resilience of the US economy shows the need for further increases in borrowing rates.
At an event held at the Wharton School of Business, he explained that this measure was necessary to reduce inflation to 2%.
Kashkari, known as one of the FED's most hawkish policy makers, suggested that interest rates may need to rise a little more and be kept at this level for a longer time in order to cool the economy. This statement came after the FED kept the policy rate constant in the range of 5.25%-5.50% last week.
The majority of FED policy makers predict another interest rate increase by the end of the year. Kashkari confirmed that he agreed with this view and said, “I am one of them.”
US central bank officials have also hinted they will keep interest rates higher for longer than previously expected. While less than half of the officials predicted that interest rates would be reduced below 5% next year, one suggested that the policy rate should exceed 6% by the end of 2024.
Despite these forecasts, Kashkari stated that if inflation cools as expected next year, the FED will need to reduce interest rates to prevent policy from tightening excessively. Kashkari also said he was surprised how well consumer spending has withstood the Fed's interest rate hikes so far.
Kashkari assured that “everyone on the Federal Open Market Committee is committed” to achieving the Fed's 2% inflation target. As of July, inflation was 3.3% by the Fed's preferred measure.
*This is not investment advice.