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"

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated on October 1 (local time) that he will take all necessary measures to bring inflation down to its target level. However, he left open the possibility of further tightening, saying he does not know to what level the benchmark interest rate must be raised in order to achieve this goal.

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

In an interview with Bloomberg TV on the same day, President Kashkari said, "We will do whatever is necessary to bring inflation back down to our target," adding, "Ultimately, the question is how high we need to raise rates, and I do not know the answer to that."

He also emphasized that if supply shocks such as rising oil prices persist over a long period, the Federal Reserve (Fed) must respond. While a one-time supply shock might justify temporarily tolerating higher prices, he expressed that continued delays in price stability cannot be allowed for this reason.

President Kashkari said, "If it is truly a one-time supply shock, that is acceptable," but added, "If so-called one-time supply shocks continue for five years, it ultimately falls to the Fed to bring inflation back down."

When asked whether the Fed must accept a weakening labor market to control inflation, he responded that a deterioration in employment is not necessarily required. He explained this is because he does not currently view the labor market as a primary driver of inflation.

He said, "Today, I do not think the labor market is the main cause of inflation," clarifying that he does not believe pain in the labor market must inevitably accompany efforts to lower prices. However, he did add, "I do not want to rule out the possibility entirely."

President Kashkari pointed out that while the Fed has a dual mandate of maximum employment and price stability, progress toward the price stability goal has been delayed. He said, "One side of the dual mandate—employment—currently appears rather strong, but as for the other, price stability, we have failed to reach our target for five years now."

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

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