Fed’s Kashkari Says Rate Hikes Were Uncalled

The Federal Reserve erred by raising interest rates during the recovery, part of a policy implementation that misread key signals and threatened to send the economy into recession, Minneapolis Fed President Neel Kashkari said Thursday.

In an unusually harsh rebuke of central bank actions, Kashkari said the central bank shouldn’t have tightened monetary policy with inflation so low. Instead, he said, the policymaking Federal Open Market Committee should be signaling that it will allow inflation to run higher than the 2% target, a move that would send a clear signal that the Fed is serious about stimulating the economy.

The FOMC hiked rates nine times starting in December 2015 as part of an effort to normalize policy following the extreme accommodations made during and after the financial crisis and Great Recession. Those hikes came even as inflation stayed well below the Fed’s goal.

“In my view, these rate increases were not called for by our symmetric framework,” Kashkari said during a speech in Santa Barbara, California.

The remarks came as part of a review the Fed is doing of its framework and the approach it has taken to jolting the economy back to life.

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