Minneapolis Fed President: "Uncertain How High Rates Need to Go"

"If Supply Shocks Persist for Five Years, It Is Ultimately Up to the Fed to Lower Inflation"

Neil Kashkari, President of the Minneapolis Federal Reserve Bank, stated on October 1 (local time) that he will take the necessary measures to bring inflation back down to target levels. However, he left open the possibility of additional tightening, saying it is unclear how high the benchmark interest rate may need to go.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis. Reuters/Yonhap News

In an interview with Bloomberg TV that day, President Kashkari remarked, "We will do what is necessary to bring inflation back to target," and added, "The ultimate question is how high we need to raise rates, but I do not know the answer to that."

He also emphasized that if supply shocks—such as rising oil prices—are prolonged and repeated, the Federal Reserve must respond. While one-off supply shocks may warrant tolerating a temporary rise in prices, he indicated that price stability cannot be postponed indefinitely on that basis.

President Kashkari stated, "If it really is a one-off supply shock, that's fine," but also said, "If you have a so-called one-off supply shock that lasts for five years, it will ultimately fall to the Federal Reserve to bring inflation down again."

When asked whether containing inflation requires accepting a weakened labor market, he replied that a deterioration in employment is not strictly necessary. He cited that he does not currently view the labor market as a primary driver of inflation.

He explained, "I do not think today’s labor market is the main reason for inflation," adding that he does not necessarily believe pain in the labor market is essential to bringing down prices. However, he added, "I do not want to rule out the possibility."

President Kashkari pointed out that among the Federal Reserve’s dual mandate of maximum employment and price stability, achievement of the price target is being delayed. He stated, "Employment, which is one side of the dual mandate, appears quite healthy at the moment, but on the other side, inflation has failed to meet the target for five consecutive years."

Regarding the U.S. economy, he assessed that it has demonstrated stronger-than-expected resilience. However, he noted that even if the economy remains robust, there is still room for monetary policy to have an impact.

This content was produced with the assistance of AI translation services.