Would You like a feature Interview?
All Interviews are 100% FREE of Charge
Minneapolis Fed President Neel Kashkari said Tuesday there are signs the Fed’s inflation drive may not yet have enough restrictive policy to bring down high prices.
In a memo released Tuesday, Governor Kashkari said the housing market has been surprisingly resilient in the face of tight monetary policy, and that policymakers and markets have misjudged the near-term neutral interest rate. He said there are suspicions that this may be the case.
“My colleagues and I are of course very pleased with the proof of labor market resilience, but the flatness of inflation in the most recent quarter shows just how restrictive policy really is,” he said. There are doubts as to whether this is the case.” he wrote in a memo published on the bank’s website..
The president of the Federal Reserve Bank of Minneapolis said that since the 2008 financial crisis, the United States has built less housing than necessary to keep pace with population growth, resulting in a prolonged housing shortage.
Additionally, while COVID-19 has accelerated the rise in remote work and increased demand for housing in many markets, the recent influx of immigrants has further increased supply pressure, Kashkari said.
Meanwhile, Fed policy has pushed 30-year mortgage rates up by about 3.5 percentage points, from about 4% before the pandemic to about 7.5% now.
“If we didn’t have these unique factors that are driving demand for housing, mortgage rates at that level probably wouldn’t be as contractionary for housing investment,” he said, adding that the neutral rate for the housing market has risen since the pandemic. He added that there may be.
Kashkari said at a press conference. Milken Institute Global Conference He said Tuesday that the most likely scenario for the U.S. economy is for interest rates to remain high “for an extended period of time,” but that lower rates would be necessary if inflation falls or the labor market weakens significantly. also mentioned.
“Or if we are ultimately convinced that inflation is currently entrenched or entrenched at 3% and we need to raise it further, we will do that if necessary,” he said during the meeting.