A former dovish official , the Fed official continued to firmly maintain his position of maintaining interest rate hikes and restrictive policies to suppress inflation.
On Wednesday, local time, next year, Minneapolis Fed Chairman FOMC, who has the voting rights for the Federal Reserve Monetary Policy Committee - FOMC, said, "If the economy falls into a sharp decline", if the Federal Reserve believes that inflation will fall very, very quickly, the Fed may stop hikes, and if necessary, it may "reverse what we are doing."
Then Kashkali said:
"For me, the threshold for this change is very high because we haven't seen much evidence that potential inflation - service inflation, wage inflation, labor market - is slowing down."
"I think we still have a long way to go from (policy shift). I think it's more likely that we'll raise the (interest rate) to some level above 4% - maybe 4.5%, and then pause, stay at that level for a longer period of time, allowing the austerity we've already completed to have an impact on the economy."
While emphasizing the Fed's commitment to curb inflation, Kashkali also explained why the Fed won't raise interest rates faster than it already has. "If we add 2, 3 or 4 percentage points at a time, it is likely to be too much, and it will eventually be excessive (rate hikes) unnecessary. So, while taking action, observing the data and checking the economic reaction, this will allow us to try to measure strength to a certain extent, while also acting radically." Before Kashkali's speech, the September PPI released earlier on Wednesday increased month-on-month for the first time in the past three months, with an increase of 0.4% higher than the 0.3% expected by Wall Street .
Some economists commented that the PPI, which grew beyond expectations, makes people more worried. Even if the prices of certain commodities fall, the impact on the supply side eases and high inflation has become more deeply rooted. The possible cycle of rising between wages and prices, especially in the service industry, will keep Fed policymakers in the argument that a large rate hike is needed. After the announcement of
PPI, the market's expectations for the Fed's fourth consecutive rate hike of 75 basis points further heated up. CME's "Feder Watch Tool" shows that the current federal funds rate futures market is expected to raise interest rates in November at 86%, significantly higher than the expected probability of about 66% a week ago, and slightly higher than the 81% a day ago.
7 CPI slowed unexpectedly in July. The former dovish still insisted on hiking interest rates
Wall Street News mentioned that after announcing the slowdown in US CPI growth in July in early August this year, Kashkali made it clear that the Federal Reserve is still "far from the time to declare victory" in reducing inflation, and must let the inflation rate return to 2%. The July CPI will not change its path, which may only be the first time to imply that inflation is starting to run in the right direction.
Kashkali said at the time that the idea that the Fed would cut interest rates when inflation is still high is unrealistic. The Fed will raise interest rates until inflation eases. He hopes the Fed rate will reach 3.9% by the end of this year and 4.4% by the end of next year.
At that time, media commented that Kashkali was the most dovish Federal Reserve official for a long time, and these remarks showed that he had become a big hawk.
Two weeks ago, Kashkali said that the current pace of rate hikes is appropriate, and admitted that given the lag of monetary policy , there is a risk of excessive rate hikes.
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