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15/05/24
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Kashkari Supports Higher for Longer Rates
On Wednesday, Neel Kashkari, Minneapolis’ Fed President supported the case for interest rates being kept higher for longer after saying he was not certain about how restrictive the current monetary policy was after inflation showed it was more resilient than expected.
Kashkari said during a moderated discussion at the Williston Basin Petroleum Conference he was not sure how much downward pressure monetary policy was putting on the economy as this was an unknown.
This meant that the Fed therefore had to keep rates unchanged for a while longer until they determined where underlying inflation was going.
Although the current level of interest rates of between 5.25% and 5.5% would generally be restrictive enough to ease inflation and the economy, distortions related to the pandemic, including supportive measures such as stimulus checks and a massive wave of fiscal spending have made the economy more resilience than the Fed had anticipated.
Kashkari added it seemed as if there was more resilience in the economy than he had anticipated. Due to some of those dynamics, the high interest rates only mean the Fed was not putting two feet on the brake but only one.
The remarks came shortly after economic data showed the CPI last month slowed more than anticipated after 3 months of surprises to the upside.
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