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Kashkari backs gradual rate hikes to stay ahead of inflation

Minneapolis Fed President Neel Kashkari argued monetary policy is not yet meaningfully restrictive, citing resilient labor conditions and robust corporate earnings.

Reported · Written up by our desk · Central Banks

Minneapolis Fed President Neel Kashkari defended his dissent from last week’s FOMC decision, saying the central bank should begin raising rates gradually rather than risk policy falling behind inflation. Speaking to CNBC from the Aspen Ideas Festival, he stressed he is not calling for aggressive tightening, and instead supports starting slowly as more data becomes available.

Kashkari said he does not see evidence that monetary policy is meaningfully restrictive right now, pointing to strong corporate earnings, resilient consumer spending, and a labor market that continues to hold up. He also noted that June inflation improved after oil prices temporarily retreated, but warned that persistent supply shocks could keep the inflation outlook elevated.

While Kashkari was one of three policymakers who voted for a 25-basis-point rate hike, the majority chose to keep the federal funds rate unchanged at 3.50% to 3.75%. He said he would rather “get going now in small steps” than wait and potentially face the need to raise rates much more aggressively later.

Kashkari said future decisions depend on incoming economic data and stopped short of explicitly endorsing a September hike. He also recalled that Fed Chair Kevin Warsh encouraged independent judgment, telling him to do what he believes is right for the economy.

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