(Reuters) – Minneapolis Federal Reserve Bank President Neil Kashkari said on Tuesday his biggest concern was that the Fed had misread the extent and persistence of price pressures and needed to take more action. Aggressive rate hikes to control inflation.
Kashkari is already the most hawkish of all central bank 19 policymakers and expects the Fed to need to raise its policy rate, currently at 2. 25%-2.5%, with a further two percentage points increase by the end of next year.
“The biggest fear in my mind is that if we are wrong, the market is wrong, and this inflation is much higher than we appreciate or the market appreciates, then we’re going to have to outpace me Expect more positive, possibly longer, to bring inflation back down,” Kashkari said.
Now, he said, it’s “very clear” that the Fed needs to tighten monetary policy.
If inflation hits 4%, he said, the Fed can afford to raise rates slowly to ensure it doesn’t raise rates too much and send the economy into a downturn.
But with inflation so high, he said the Fed needs to “wrongly ensure we’re getting inflation, and only if we see convincing
Kashkari said his biggest concern is that if the Fed “misreads the underlying inflation dynamics, then it may take a while for us to Figure that out, and then we’re going to have to be more hawkish than I’m thinking right now.”