Kashkari: Policy Appropriate; Too Much Mkt Focus on Every Move
(Bloomberg) -- Minneapolis Fed Pres. Neel Kashkari said that Fed’s current stance of policy is “appropriate,” and he’s “hesitant” to draw even more attention to central bank’s short-term moves because mkt is already “too focused” on it.
- Policy is appropriate, given lack of wage/price pressures and prospect of drawing more people back into labor mkt, Kashkari said in text of speech Mon. in Minneapolis; an increase in inflation would be “desirable”
- NOTE: Earlier Mon., Reuters reported Kashkari as saying in interview that June rate hike is “possible,” signaling support for cautious, patient approach to rate hikes
- Mkt’s preoccupation with every short-term move by Fed is akin to “Summer of the Shark in 2001”; slow news summer that yr led to more coverage of sharks, giving impression that they were “biting people seemingly every day”
- “I am reluctant to draw even more attention” to Fed’s short-term policy decisions
- “Whether the FOMC raises rates in June isn’t going to be what determines whether our children and grandchildren are better off than we are”
- Sees himself as neither a dove or hawk; “financial crisis taught me the limits of dogma”; if different economic conditions call for less accommodation in yr or two, might need to reverse himself
- Truth is central banks can’t influence many things that “really matter,” such as productivity growth
- Don’t know if weak productivity is “troubling sign” for future
- While Fed policy has helped labor mkt recovery, “it alone can get us only so far”
- Most encouraging sign of further labor mkt improvements is sizable, unexpected increase in participation
- “If we can continue bringing displaced workers back into the labor force, we should”
- “Serious national conversation” is needed on whether enough has been done to address large bank failures
- NOTE: Kashkari, a former Pimco executive and Treasury official who oversaw TARP program, joined Minneapolis Fed in Jan.; he succeeded Narayana Kocherlakota and becomes voter on FOMC in 2017
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HALISTER1Source: BFW (Bloomberg First Word)
People Neel Kashkari (Federal Reserve Bank of Minneapolis)
Topics BGOV Finance
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