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DailyExpertNews
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Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, understands that consumers are still struggling with high prices. And he’s got the frozen lasagna to prove it.
Kashkari told DailyExpertNews’s Poppy Harlow on Tuesday that he knows firsthand how expensive many consumer goods and services are.
The central banker took over grocery shopping for his family at the start of the pandemic, he said, and has continued to do so ever since, he told “DailyExpertNews This Morning.” His hometown newspaper, the Star Tribune, recently followed Kashkari on one of his supermarket trips.
“I watch grocery prices. There’s a large tray of lasagna that I used to buy that used to cost about $16. Now it’s about $21. That’s my own little measure of how inflation is going,” he said.
Kashkari acknowledged that inflationary pressures are easing, but said the Fed is still unhappy with high prices, particularly for services. He noted how many parts of the economy have picked up steam, adding to inflation. For example, he pointed out that his flight from Minneapolis to New York was completely full.
Continued strong wage growth is also fueling inflation, Kashkari said.
These are some of the reasons he thinks the Fed should keep raising rates, or stay high longer, to ensure it can push prices down.
“We have more work to do,” Kashkari told Harlow, adding that the job market is “too hot” and that this is a major reason why it’s “more difficult to bring down inflation.”
Kashkari has a vote this year on the Federal Open Market Committee, the Fed’s rate-setting group. He and his colleagues voted last week to raise the central bank’s benchmark interest rate by a quarter point to a range of 4.5% to 4.75%.
While many investors are starting to think that after just two similar small hikes, the Fed could pause to levels around 5%, Kashkari said he believes the Fed may need to raise rates further.
He told Harlow that he is bidding short-term rates as high as 5.4% before pausing. That makes Kashkari one of the more aggressive members of the Fed, meaning he advocates for higher rates.
However, Kashkari has previously been seen as a dove, arguing for more incentives to help consumers and small businesses during the height of the pandemic.
The good news is that Kashkari, like a growing number of financial experts, is starting to think that the US economy avoid a recession and instead experience a so-called soft landing or a gradual cooling.
It’s hard to have a recession when the job market is still so robust, he told Harlow. The unemployment rate just hit a half-century low of 3.4% and the economy added 517,000 jobs last month. Treasury Secretary Janet Yellen recently made a similar argument.
However, the stronger-than-expected labor market poses more of a challenge for the Fed to bring inflation back to more normal historical levels, Kashkari said. So it may be difficult for the Fed to make a soft landing if it has to keep raising rates.
Kashkari, a former Treasury official who oversaw the Troubled Assets Relief Program (TARP), the federal bank’s bailout following the 2008 Lehman Brothers collapse and ensuing financial crisis, also hopes the government doesn’t make matters worse by not reaching an agreement. to reach the debt ceiling before default.
Bankruptcy would be a “catastrophe” and a crisis must be averted, he said.
“Congress decides how much they want the executive to spend, so it’s a little unusual that they would tell them to spend this money and then not give them the resources,” he said. “But that’s ultimately up to the elected leaders to come to an agreement.”