The Federal Reserve should continue to tighten monetary policy until it is clear that inflation is coming down from today’s very high levels, said Federal Reserve Bank of Minneapolis President Neel Kashkari.
“When inflation is at 8% or 9%, we run the risk of destabilizing inflation expectations,” Kashkari said on Tuesday. If that happens, the Fed will likely have to launch very aggressive rate hikes to restore balance. .
“Of course we want to prevent this from happening. So when there is high inflation, I personally prefer to err on the side of trying to make sure that inflation is coming down and relax only when we see convincing evidence that inflation is on track to dropped again to 2%”, he said.
The official said his “biggest concern” is that inflation will be more persistent than many expect, noting that much of the inflation rally is linked to supply chain problems.
Source: Capital
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