Kashkari isn't a voting member this year
Minneapolis Fed President Kashkari argued for cutting 50 basis points this week, he wrote in an essay posted on the Minneapolis Fed website..
- Aggressive action needed to re-anchor inflation expectations
- Sees long-run inflation expectations running at 1.7% currently
- Fed should commit to not raising interest rates until inflation is sustainably at 2%
- Read it here
It's rare for a non-voting member of the FOMC to publish this kind of essay but Kashkari isn't afraid to be outspoken and I find it hard to disagree with what he's saying.
Full-text highlights:
"I advocated for a 50-basis-point rate cut to 1.75 percent to 2.00 percent and a commitment not to raise rates again until core inflation reaches our 2 percent target on a sustained basis."
"In the past few months, the job market has slowed, wage growth has flattened, inflation has continued to come in below our 2 percent target, inflation expectations have fallen, and the yield curve has inverted."
"The Committee has consistently been too optimistic in forecasting inflation returning to 2 percent."
"It is certainly possible that temporary factors are holding inflation down. But we've been saying that for years."
" It seems unlikely that the United States will experience a surge of inflation while the rest of the developed world suffers from low inflation."
"It seems likely that policy is somewhere between neutral and moderately restrictive. Given the lack of inflation pressures and potential remaining slack in the labor market, I want to make sure policy is not restrictive, and I believe we should err on the side of providing accommodation."
"The cost of cutting rates early is much smaller than the cost of cutting too late. If we wait until we are sure the economy is slowing and inflation expectations fall further, it will be much harder for us to reverse those concerning developments and sustain the economic expansion."
