Federal Reserve Bank of Minneapolis CEO says inflation is ‘very concerning’ and ‘spreading out’ across economy

Federal Reserve Bank of Minneapolis CEO says inflation is 'very concerning' and 'spreading out' across economy

The Federal Reserve Bank Minneapolis CEO and President Neel Kashkari said Sunday that the current state of inflation is “very concerning” and “spreading more broadly through the economy.”

“It’s very concerning. We continue to get inflation readings, new data coming in as recently as last week, and we continue to be surprised. It’s higher than expected,” Kashkari said during an appearance on CBS’ “Face The Nation.” “And it’s not just a few categories. It’s spreading more broadly through the economy and that’s why the Federal Reserve is acting with such urgency to bring it under control and bring it back down.”

Kashkari pointed out that while wages are rising for many Americans, the costs of goods and services are also rising, meaning workers are experiencing a “real wage cut” because inflation is rising so fast. He said wage-driven inflation was not happening and the cost of goods was partly due to supply chain disruptions, including caused by the pandemic and now the war in Ukraine.

“For most Americans, their wages are going up, but they’re not going up as fast as inflation, so real wages, real incomes for most Americans are going down,” he said. “They benefit from a real wage cut because inflation is rising so rapidly. I mean, typically, we think of wage-induced inflation where wages are rising rapidly and causing prices to rise in an auto spiral. – director – it’s not yet. High prices and wages are now trying to catch up with these high prices. These high prices are now being driven by supply chains and the war in Ukraine, among other factors. We need to so get the economy back in balance before it really becomes a very wage-driven inflation story.”

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Minneapolis Federal Reserve Chairman Neel Kashkari tours “Maria Bartiromo’s Wall Street” at Fox Business Network Studios on March 29, 2019 in New York City. (John Lamparski/Getty Images/Getty Images)

Noting recent economic cost index results, he stressed that it’s a good thing Americans are earning more, but the Federal Reserve can’t wait for the supply chain to adjust to bring prices down. .

“Right at its base level, inflation occurs when demand exceeds supply. We know supply is low because of supply chains, because of the war in Ukraine, because of COVID. We were hoping for the supply to come online faster. That hasn’t happened,” Kashkari said. “So we have to reduce the demand in the balance. Now, hopefully we’ll get help from the supply side, but that doesn’t change the fact that the Federal Reserve has its job to do, and we’re committed to doing that.”

“We can’t wait for supply to completely heal. We have to do our part with monetary policy,” he added.

Kashkari argued that the new bill introduced by Sens. Chuck Schumer, DN.Y., and Joe Manchin, DW. Va., nicknamed the Inflation Reduction Act “will not have much impact on inflation” over the next few years, and it will be the job of the Federal Reserve to adjust monetary policies to bring it down.

Neel Kashkari at the Yahoo Finance Summit

Moderator Brian Cheung and banker Neel Kashkari attend the Yahoo Finance All Markets Summit at Union West Events on October 10, 2019 in New York City. (Jim Spellman/Getty Images/Getty Images)

“In the short term, the demand side effects have totally overwhelmed the supply side effects. And so when I look at a bill in the works that your two senators have been talking about, I guess it’s at over the next two years, it’s not going to have a big impact on inflation,” he said. “It won’t affect the way I analyze inflation over the next few years. I think in the long term that may have some effect, but in the short term we have an acute mismatch between demand and supply, and it’s really up to the Federal Reserve to be able to bring that down request.”

The White House has repeatedly refrained from admitting the The US economy is in recession and debated the definition of the term. On Sunday, Kashkari argued that inflation is so bad it doesn’t matter whether we use the term recession or not, and that serious work needs to be done to address it.

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“Basically, the labor market seems to be very strong while the GDP, i.e. the amount produced by the economy, seems to be declining. So we are getting mixed signals from the economy. From my point of view , in terms of controlling inflation, whether we’re technically in a recession or not doesn’t change my analysis,” he said. “I’m focusing on inflation data. I’m focusing on wage data. And so far, inflation continues to surprise us on the upside. Wages continue to grow. So far, the The labor market is very, very strong. And that means whether we’re technically in a recession or not doesn’t change the fact that the Federal Reserve has its own job to do.”

“We are a long way from having an economy that returns to 2% inflation, and that’s where we need to go,” Kashkari added.

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