The Fed is dovish as the "Eagle King": Action must be taken to control inflation

time:2022-12-09 14:08:28source:chakarski.com author:Aerospace stock
The Fed is dovish as the "Eagle King": Action must be taken to control inflation

Minneapolis Fed President Neel Kashkari said on Tuesday that given the current high inflation, the Fed needs to continue to tighten monetary policy until there is clear evidence that high inflation is receding. By many measures, the U.S. is currently at peak employment and has very high inflation, Kashkari said Tuesday at a gathering at the Wharton Club of Minnesota in Minneapolis. This could lead to an imbalance in inflation expectations that would require the Fed to tighten monetary policy to balance it out: when inflation hits 8% or 9%, inflation expectations run the risk of getting out of hand. We have to take Volcker-style (very aggressive) measures and then re-anchor inflation expectations. We'd rather go too far than go too far in ensuring inflation is lower, and only ease when we see strong evidence that inflation is falling back to 2%. Regarding the balance between interest rate hikes and economic recession, Kashkari believes that if the U.S. inflation rate falls to 4%, the Fed will be able to slow down the pace of interest rate hikes to avoid the impact of continued interest rate hikes on the economy. Kashkari stressed that his biggest concern right now is that inflation will be more persistent than many currently expect. It believes that the current surge in inflation in the United States is still mainly related to supply chain problems: about two-thirds of inflation is attributed to the supply side, and the remaining one-third stems from fiscal stimulus and Federal Reserve policies. The Fed's task would be easier if supply-side constraints ease. Kashkari, who does not have the right to vote this year, as a "well-known dovish" in the pre-pandemic Fed, has seen a major shift in its policy stance in recent months. On the issue of interest rate hikes, Kashkari is already the most hawkish of the 19 Fed policymakers. He believes that the Fed needs to continue to raise policy interest rates before the end of next year. On the basis of the current 2.25%-2.5%, two more interest rate hikes are required. percent. Kashkari's concerns about inflation are not "fearless." U.S. inflation remained hovering near a 40-year high in July. In July, the CPI rose by 8.5% year-on-year, and the core CPI rose by 5.9% year-on-year. The pace of price increases is slowing, but it has not yet shown a downward trend strong enough for the Fed to abandon monetary tightening. Fed officials will travel to Jackson Hole, Wyoming, for their annual meeting this week. Some analysts believe that Fed Chairman Powell may use the opportunity to speak at the Jackson Hole meeting on Friday to reset financial market expectations for the future path of interest rates. This article is from Wall Street News, welcome to download the APP to see more
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