Minneapolis Federal Reserve President Neil Kashkari said Monday that he is confident inflation will return to normal, although it will take longer than he expected.
Recognizing that he was a “transition team”, believing that rising prices would not continue, he said the persistent imbalance between supply and demand had generated the highest inflation rate in more than 40 years.
While the Fed’s monetary policy instruments can help reduce demand, they can’t do much to secure supply.
“I am confident that we will return inflation to our 2% target,” he told CNBC in an interview with Squawk Box. “But I’m still not sure what part of that burden we will have to bear compared to getting help from supplies.”
Angeli Sundar | CNBC
His comments came less than a week after the Federal Open Market Committee set interest rates by raising benchmarks by half a percentage point. The increase of 50 basis points was the largest increase in 22 years and creates the ground for a series of steps of similar size in the coming months.
Although Kashkari has historically advocated lower rates and weaker monetary policies, he voted for two increases this year as needed to control rising prices. However, he noted that the burden of tighter policies will fall on those at the bottom of the wage spectrum.
“These are the lowest-income Americans who are most affected by this rise in prices, and yet your policy instruments to reduce inflation have the most direct impact on those low-income Americans, either by raising the cost of getting a mortgage … we have to do so much so that the economy went into recession, ”he said. “It’s their job most likely under threat.”
“Therefore, I think it is a difficult task for all of us, but we also know that if inflation stays at these very high levels, it is not good for anyone and it is not good for the long-term potential of the economy for all given income. distribution, ”he added.
On Wednesday, the government will publish the latest data on consumer prices, and on Thursday – April producer prices.
According to Dow Jones, economists expect inflation to slow slightly in April, and the main consumer price index is likely to show growth of 8.1% over the past year and 6% excluding food and energy. This is compared to the growth in March of 8.5% and 6.5%.
Such figures provide some comfort to Kashkari, although he said conditions remain difficult as long as there is an imbalance of supply and demand.
“We just need to keep paying attention to the data,” he said. “Some of the latest inflation data on some indicators is a little softer than we thought it might come. So there may be evidence that things are starting to soften by a hair. But we just need to keep looking at the data and see where it will come out before we can draw any conclusions. “