(Reuters) – Minneapolis Federal Reserve Bank President Neel Kashkari on Tuesday said U.S. central bankers are united in their determination to do what is needed to bring inflation down, and financial markets understand that.
“There’s a lot of tightening in the pipeline,” Kashkari said in a WSJ Live interview, referring to interest rate hikes already delivered but yet to have an effect on the U.S. economy and on price pressures.
“We are committed to restoring price stability, but we also recognize, given these lags, there is the risk of overdoing it on the front end, and so I think we are moving at an appropriately aggressive pace,” he said.
The Fed again raised interest rates last week and signaled that more rate hikes are on tap in the fiercest battle with inflation in 40 years. Since then U.S. stock markets have swooned and some global currencies have nosedived.
Kashkari said he believes markets have digested the Fed’s intent to bring inflation down and that while monetary policy now is tight, it will need to be tighter still.
“The economy is sending us a lot of mixed signals right now,” Kashkari said. “I believe we need to keep tightening policy until we see some compelling evidence” that underlying inflation, now three times the Fed’s 2% target, is heading down. “And then I think we need to sit there and we need to pause and wait and let the tightening work its way through the economy to see at that point, have we done enough?”
While the Fed would like to achieve a “soft landing” for the economy, Kashkari said, the outcome hinges on what happens with the supply side, which is out of the Fed’s control, and in any event the Fed will do what it takes to bring inflation down.
(Reporting by Ann Saphir; Editing by Leslie Adler)