Fed's Kashkari: Inflation Coming Up Short; Lack of Wage Growth

By Jean Yung

     WASHINGTON (MNI) - The Federal Reserve still has a ways to go to achieve

its inflation target, Minneapolis Fed Bank President Neel Kashkari said Monday,

reiterating the main reason he has cited this year for voting against two

interest rate increases.  

     "Inflation has been coming up short -- a little low -- relative to our 2%

target," Kashkari told the Rotary Club of Sioux Falls, South Dakota. 

     "It actually matters that investors believe the Fed can achieve its goals,"

because the central bank's credibility depends on it, Kashkari said. "I would

like to see higher wage growth for workers' sake, for towns' sake and for the

Fed's sake." 

     Businesses are still not raising wages even as they complain it's

increasingly more difficult to find workers, he said. 

     "We're seeing the unemployment rate go down. We would think we'd see wages

go up across the board but we're not," he said. 

     He said he wants to see "a strong economy driven by innovation, driven by

real population growth that we hope will lead to higher wages where everybody is

better off."

     But productivity growth has also been frustratingly slow, and it's unclear

what innovations could deliver a jolt to productivity or whether policymakers

can see them coming.

     Kashkari said in June he preferred to await additional evidence that the

recent decline in inflation was temporary and that inflation was moving toward

the Fed's 2% goal before tightening monetary policy further. 

     The core personal consumption expenditures price index, the Fed's preferred

gauge of inflation, rose 1.5% from a year ago in June. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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