Fed’s Kashkari Asks What’s the Rush? on Raising Rates

With inflation low and wages showing little sign of an upward surge, the U.S. Federal Reserve should not be raising interest rates, Minneapolis Fed President Neel Kashkari said on Tuesday.

“What’s the rush?” Kashkari asked at an event at Michigan Technological University in Houghton, Michigan, adding that neither wage nor inflation data is giving any sign that the economy is about to overheat and indeed may suggest that there is still some slack in the labor market.

The Fed raised rates twice this year, including earlier this month, and Kashkari dissented both times.



He disagrees with Fed Chair Janet Yellen, who sees unemployment at a 16-year low and projects inflation will necessarily move toward the Fed’s 2 percent target. Yellen says the Fed needs to keep raising rates to prevent inflation from overshooting.

Though Kashkari failed to persuade his colleagues in June that they should leave rates alone, he continues to make his case for it. On Tuesday, he repeated his view that with inflation weakening in recent months, “I don’t see what we are so worried about.”

“Why are we trying to cool down the economy, when there may still be some slack in the job market, and there is still some room to run on the inflation front?” he said. “We’re not seeing wages climb very fast, and we’re not seeing inflation. That tells me the economy is not on the verge of overheating.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza