Kashkari: Too Early to Raise Interest Rates, But All Options Are Open
Federal Reserve Bank of Minneapolis President Neel Kashkari said it was too early to conclude that interest rates need to be raised, but emphasized that the Fed should keep all policy options open. Speaking on Friday (May 29) at an event at Korea University in Seoul, Kashkari stated that he did not see any urgency to raise interest rates immediately and preferred to wait for data and developments in the Middle East conflict before making any adjustments.
The Fed held interest rates unchanged at its April meeting. Kashkari supported the decision, but was among three policymakers who dissented from the wording of the statement that signaled a possible cut next. He and two colleagues pushed for more neutral language to help markets understand that a rate hike is equally likely if inflation strengthens again.
Kashkari, along with several other Fed officials, believes the Iran war increases uncertainty about the US economic outlook. He also highlighted the risk that inflation has risen in recent months since the war broke out and that energy prices have risen, prolonging pressures on the cost of living that have been high for several years.
On Friday, Kashkari reiterated that, in both best-case and worst-case scenarios, inflation could run higher for longer than expected. He said he was paying attention to these risks, including the possibility of inflation expectations "unanchoring," which would make the central bank's task of stabilizing prices more difficult.
For the market, Kashkari's message reinforced a major theme this week: the Fed hasn't locked in a course, but its bias is increasingly "data-dependent," with a heavy weighting on energy inflation and inflation expectations. This means any surprises in inflation data and geopolitical developments could quickly shift the pricing of interest rates, yields, the dollar, and interest-rate-sensitive assets. (Arl)
Source: Newsmaker.id
