Halister News

(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