Kashkari pointed out in the article that Fed officials may have underestimated the level of the "neutral interest rate" and thus expected that the current monetary policy will have a greater impact than the actual situation.He believes that the continued stagnation of inflation at current high levels does pose a "challenge" to the Fed's monetary policy.
"With inflation moving sideways in the latest quarter, there are questions about how restrictive (the role) monetary policy will be."Kashkari wrote in the article that recent data show that demand in the U.S. economy continues to grow strongly.Although mortgage rates remain relatively high, housing investment is rebounding.Weak gross domestic product (GDP) growth in the first quarter masked strong underlying demand.This suggests that the Fed's monetary policy may not be tightening enough and that the U.S. inflation rate may "stable at around 3%.
"He believes that the Fed will face a question, that is, whether the anti-inflation process is still continuing, or whether inflation will stabilize at a high level of around 3%.If the latter is the case, the Fed will need to do more work if it wants to achieve its inflation target.Kashkari said at an event that day that the federal funds rate may need to remain at its current high level "for an extended period of time."based on the upcoming inflation data, he will lower his interest rate cut forecast to zero from the previous two times in the latest economic outlook released by the Fed at the June meeting.
The Federal Reserve concluded its May monetary policy meeting on the 1st, maintaining the federal funds rate target range at 5.25% to 5.5% for six consecutive meetings, and announced that it will slow down the pace of reducing its balance sheet starting in June.Federal Reserve Chairman Powell said at a press conference after the meeting that demand in the U.S. labor market remains strong and inflation is growing faster than expected.In this case, "it may be appropriate to delay a rate cut."
