The US Federal Reserve may need to push long-term real rates to a dovish stance to help curb inflation, Minneapolis Fed President Neel Kashkari said over the weekend.
“We will need to look at the data over the next few months to determine if meeting the current guidance is enough to reduce inflation or if we will need to do more,” Kashkari explained in an essay published on Medium, adding that the Ukraine war, in addition of the Covid-19 closures in China will likely delay the normalization of supply chains.
“If the chains don’t loosen up quickly or if the economy really is in a higher pressure scenario, we will probably have to push long-term real rates into a tightening stance to balance supply and demand,” he said.
The Fed raised interest rates by half a percentage point last week, the biggest increase in 22 years, and Chairman Jerome Powell has signaled that they are willing to approve half percentage point increases at meetings in June and July, in order to to intensify the fight against high inflation.
Separately, the Labor Department reported that nonfarm payrolls increased by 428,000 jobs last month, while the unemployment rate remained at 3.6 percent.
Last Wednesday, Powell mentioned that “the labor market is extremely tight and inflation is too high.”