Minneapolis Federal Reserve President Neel Kashkari said on Friday he wants to keep the U.S. central bank’s benchmark short-term interest rate near zero at least through the end of 2023 to allow the labor market to return to its pre-pandemic strength.
“The vast majority of Americans want to work, and I am not ready to write them off – and I want to give them the chance to work,” Kashkari told Reuters in his first public comments since the end of the Fed’s policy meeting earlier this week. “As long as inflation expectations remain anchored … let’s be patient and let’s really achieve maximum employment.”
Kashkari’s remarks show he’s in a decided minority in an increasingly hawkish Fed, which on Wednesday wrapped up a two-day meeting with an unexpected result: with inflation on the rise, most Fed policymakers now see a case for starting interest rate hikes sooner.
Just three months earlier the clear majority of policymakers favored no change to the current level of borrowing costs; on Wednesday, the central bank’s quarterly summary of economic projections (SEP) showed 11 of 18 Fed policymakers penciling in at least two quarter-percentage-point rate increases by the end of 2023.
“I still have no hikes in the SEP forecast horizon because I think it’s going to take time for us really to really achieve maximum employment, and I do believe that these higher inflation readings are going to be transitory,” Kashkari said in an interview with Reuters.
In the interview, Kashkari said he believes higher prices are being driven by a reopening economy and will subside as supply constraints recede.
With employment still short of its pre-pandemic level by at least 7 million jobs, he said, “the labor market is still in a deep hole,” adding that he believes full employment means a return to at least pre-pandemic labor market strength, if not beyond.
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