Federal Reserve’s Neil Kashkari says central bank hasn’t made enough progress, maintains rate outlook

Minneapolis Federal Reserve Governor Neil Kashkari said Tuesday that January’s explosive job growth shows the central bank has more to do to keep inflation in check.

This means the Fed will continue to raise rates as the benchmark borrowing rate could rise from its current target range of 4.5% to 4.75% to 5.4%.

“We have work to do. We know that rate hikes can put a lid on inflation.” Kashkari He told CNBC in an interview Tuesday morning.”squawk box“We need to raise interest rates aggressively to cap inflation, and then allow monetary policy to work across the economy.”

Kashkari said just days after the Ministry of Labor reported: Nonfarm payrolls increased by 517,000 in Januarynearly triple Wall Street’s expectations and the strongest growth in a first month since 1946.

Strong job growth despite attempts by the Federal Reserve to use interest rate hikes to correct what officials called an “imbalance” between supply and demand in the labor market. brought.there are almost 2 open jobs per available worker, and average hourly earnings in January were up 4.4% from a year ago. The Fed believes this pace is unsustainable and inconsistent with its 2% inflation target.

“The data show that there is not much evidence of tightening in the labor market so far,” Kashkari said. “There is some evidence that it is having some impact, but so far It’s modest,” he said.

“We haven’t seen anything lowering the interest rate path yet, but we’re obviously keeping an eye on it and we’ll see how the data goes,” he added.

Kashkari’s suggestion that the federal funds rate needs to be raised to 5.4% compares favorably with other policymakers who suggested in December that the “end-of-life rate,” or the end point for rate hikes, would be around 5.1%. , into a more aggressive slot. The funding rate is what banks charge each other for overnight loans, but it also feeds a number of consumer debt products such as auto loans, mortgages, and credit cards.

Since March 2022, the Fed has raised benchmark fund rates eight times after inflation hits its highest level in more than 40 years.The most recent increase was last week’s Quarter point increase It was the smallest since the first move.

As interest rates rise, central banks are allowing up to $95 billion to be pulled off their balance sheets each month from their bond holdings, resulting in nearly $450 billion more tightening.

Still, inflation, while moderate, is well above the Fed’s target, and policymakers indicate further rate hikes are on the way.

“I don’t see that we have made enough progress to declare victory,” Kashkari said. Federal Reserve’s Neil Kashkari says central bank hasn’t made enough progress, maintains rate outlook

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