The Federal Reserve is raising interest rates aggressively in order to make plain to American households and businesses that it is committed to bringing inflation down, Minneapolis Fed President Neel Kashkari said Wednesday,
“The Fed is acting as aggressively as we are to tell the world we’re dead serious about getting inflation down,” Kashkari said, during a town hall at the Northwoods Economic Development Summit in Rhinelander, Wisconsin.
While many people ask him why the Fed is continuing to raise interest rates even though some of the most visible indicators of inflation like gasoline prices are coming down, Kashkari said his response is that “the stickier parts of inflation, wages, continue to go up, generally speaking.”
Kashkari said there was a high bar for any policy reversal.
“I think a much more likely scenario is we will raise to some level north of 4%, maybe 4.5% and then pause and sit there for an extended period of time while the tightening we’ve already done works its way through the economy,” Kashkari said.
At that point, the Fed can assess whether interest rates need to go higher or if the central bank can back off, he added.