Kashkari: Not Convinced US At Maximum Employment Yet

Minneapolis Fed’s Kashkari (’23 voter) was more cautious on banks than a month ago but otherwise kept his place at the more hawkish end of the FOMC spectrum. More hawkish elements:

• NOT CONVINCED US IS AT MAXIMUM EMPLOYMENT YET (BBG)
• NOT SEEING EVIDENCE OF SLOWING DOWN IN SERVICE SECTOR (BBG)

Less bullish on banks than in mid-April:

• BANK TURMOIL CAN BE SOURCE OF SLOWING FOR ECONOMY (BBG)
• PROLONGED INVERTED YIELD CURVE PUTS PRESSURE ON BANKS (BBG)
• Vs DON’T SEE SVB-LIKE RISK PROFILE IN WIDER BANK SECTOR (BBG) from Apr 12

Rate view in keeping with Powell’s message:

• IF HIGH INFLATION IS MORE EMBEDDED, RATES WILL NEED TO STAY HIGH FOR LONGER (RTRS)

Contextualising recent improvements

• INFLATION HAS EASED BUT IS WELL ABOVE FED'S 2% GOAL (BBG)
• WAGE GROWTH HAS SOFTENED SOMEWHAT, JOB MKT STRONG (BBG)