https://sputnikglobe.com/20220927/feds-kashkari-lots-of-tightening-left-on-us-rates-danger-of-overdoing-it-1101288958.html
Fed's Kashkari: Lots of Tightening Left on US Rates, Danger of ‘Overdoing It’
Fed's Kashkari: Lots of Tightening Left on US Rates, Danger of ‘Overdoing It’
Sputnik International
WASHINGTON (Sputnik) - The Federal Reserve has a lot more tightening to do with US interest rates in order to curb inflation and there is a danger it could... 27.09.2022, Sputnik International
2022-09-27T20:50+0000
2022-09-27T20:50+0000
2022-09-27T20:47+0000
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“There's a lot of tightening in the pipeline,” Kashkari said, appearing on a livestreamed discussion on the US economy and interest rates, hosted by the Wall Street Journal. “We are moving at an appropriately quick pace."The Fed last week announced its fifth rate for the year, raising rates by 75 basis points to bring them up by 300 points from a base of just 25 in February. The central bank’s chairman Jerome Powell said rate hikes have some way to go before the Fed considers a pause or reduction, with the likelihood of another 125 basis points being added before the end of the year.“We must continue to tighten policy until there is compelling evidence that underlying inflation has peaked and is declining,” Kashkari said. “Then we must sit and pause. Wages and rents continue to rise, resulting in stickier inflation. Right now, the economy is sending us a lot of mixed signals."For most of the past decade, the Fed had no problems with inflation, with annual price growth remaining well below its 2% target. It could be argued then that the central bank’s real problem was a lack of inflation. That changed with the 2020 coronavirus outbreak, which upended global commodities production and supply chains. Since then US inflation, as measured by the broad Consumer Price Index, or CPI, has been at or near four-decade highs.Even after the Fed’s first 75-basis point rate hike in June, the CPI grew by an annualized 9.1% that month, marking a 41-year high. Price pressures have come down since, with the CPI slowing to an annualized 8.5% in July and 8.3% in August. However, its retreat of 0.8% over two months — versus two rate hikes totaling 1.5% in the same period — hasn’t been encouraging.Kashkari echoed Fed Chair Powell’s stance of not dropping rates until the inflation fight was won, adding that this would apply even in a slowdown.“We will not repeat the mistake of cutting interest rates when the economy weakens,” the Minneapolis Fed chief said.Many economists have warned that the Fed could push the United States into a deep recession with the sharpest rate hikes in four decades, pointing to the high-flying housing sector and one-time ebullient stock market as the central bank’s potential victims.Wall Street’s three major stocks indicators — the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite — are all down about 20% or more for 2022, placing them in bear-market category.The Fed has projected an economic growth of 0.2% for this year and 1.2% for 2023, versus the runaway 5.7% in 2021, when the United States recovered robustly from business lockdowns forced by the coronavirus outbreak.
https://sputnikglobe.com/20220921/us-federal-reserve-ups-interest-rates-by-75-base-points-in-fifth-straight-anti-inflation-hike-1101062159.html
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Fed's Kashkari: Lots of Tightening Left on US Rates, Danger of ‘Overdoing It’
WASHINGTON (Sputnik) - The Federal Reserve has a lot more tightening to do with US interest rates in order to curb inflation and there is a danger it could overdo it, Neele Kashkari, the central bank’s regional chief for the district of Minneapolis, said Tuesday.
“There's a lot of tightening in the pipeline,” Kashkari said, appearing on a livestreamed discussion on the US economy and interest rates, hosted by the Wall Street Journal. “We are moving at an appropriately quick pace."
"There is a danger of overdoing it,” the official underscored.
The Fed last week announced its fifth rate for the year, raising rates by 75 basis points to bring them up by 300 points from a base of just 25 in February. The central bank’s chairman Jerome Powell said rate hikes have some way to go before the Fed considers a pause or reduction, with the likelihood of another 125 basis points being added before the end of the year.
“We must continue to tighten policy until there is compelling evidence that underlying inflation has peaked and is declining,” Kashkari said. “Then we must sit and pause. Wages and rents continue to rise, resulting in stickier inflation. Right now, the economy is sending us a lot of mixed signals."
For most of the past decade, the Fed had no problems with inflation, with annual price growth remaining well below its 2% target. It could be argued then that the central bank’s real problem was a lack of inflation. That changed with the 2020 coronavirus outbreak, which upended global commodities production and supply chains. Since then US inflation, as measured by the broad Consumer Price Index, or CPI, has been at or near four-decade highs.
21 September 2022, 19:22 GMT
Even after the Fed’s first 75-basis point rate hike in June, the CPI grew by an annualized 9.1% that month, marking a 41-year high. Price pressures have come down since, with the CPI slowing to an annualized 8.5% in July and 8.3% in August. However, its retreat of 0.8% over two months — versus two rate hikes totaling 1.5% in the same period — hasn’t been encouraging.
Kashkari echoed Fed Chair Powell’s stance of not dropping rates until the inflation fight was won, adding that this would apply even in a slowdown.
“We will not repeat the mistake of cutting interest rates when the economy weakens,” the Minneapolis Fed chief said.
Many economists have warned that the Fed could push the United States into a deep recession with the sharpest rate hikes in four decades, pointing to the high-flying housing sector and one-time ebullient stock market as the central bank’s potential victims.
Wall Street’s three major stocks indicators — the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite — are all down about 20% or more for 2022, placing them in bear-market category.
The Fed has projected an economic growth of 0.2% for this year and 1.2% for 2023, versus the runaway 5.7% in 2021, when the United States recovered robustly from business lockdowns forced by the coronavirus outbreak.
