Minneapolis Federal Reserve President Neel Kashkari said some time ago that if inflation continues to fall, it means it’s time to cut rates.
Kashkari added that he didn’t see much evidence of a weak economy. Stressing that the labor market is still very strong.
Kashkari explained that the Fed could raise interest rates if necessary. Confirming that there is currently no discussion at the Federal Reserve about lowering interest rates.
The Minneapolis Fed chief went on to say that the Federal Open Market Committee had been surprised by GDP growth, while the dollar was very strong last period.
Kashkari stressed that the return of inflation to the upside means that the Fed’s mission is not yet complete.
Yesterday’s statements
The Wall Street Journal reported yesterday, Monday, that Minneapolis Federal Reserve President Neel Kashkari said he would support tighter monetary policy over not doing enough to bring inflation back to the central bank’s 2% target.
Kashkari said in an interview with the newspaper, “Lowering rates won’t get us back to 2% in a reasonable timeframe”.
Kashkari said he needed more information to make a firm decision on raising interest rates. He confirmed to the newspaper, “I’m not ready to say we’re in a good position.”
The head of the Federal Reserve in Minneapolis added that the US central bank still had work to do to control inflation.
“The economy has proven resilient even though we’ve raised interest rates a lot over the past two years,” Kashkari explained.
Kashkari’s comments indicate that he is still inclined to raise interest rates again. The Fed met last week at a meeting that kept interest rates unchanged at between 5.25% and 5.5% and reserved the option of raising interest rates again while inflation remains well above its 2% target.
Market reaction
Gold prices suffered a sharp drop following Kashkari’s harsh statements, with gold futures falling 1.17% to $1,965 an ounce.
Meanwhile, spot gold contracts fell 0.95% to $1,959 an ounce.
By contrast, the dollar index rose by 0.42% to 105.48 points.
