MNI BRIEF: Fed's Kashkari Sees Rates To 1.75-2% This Year

Federal Reserve Bank of Minneapolis President Neel Kashkari said Friday in a blog that he is now forecasting rates to 1.75%-2% in 2022, the equivalent of what would be 7 quarter-point hikes, a radical shift compared to just December when he saw only two hikes.

"I increased it to 0.50 to 0.75 percent in the December 2021 SEP and then increased it again to 1.75 to 2.00 percent in the most recent SEP. My estimate of the nominal neutral rate remains at 2.00 percent, where I have had it for several years," he said, adding that he has increased his forecast for PCE inflation to 4.5% for this year.

The Minneapolis Fed chief also cast doubt on how transitory inflation may be. "That suggests to me that this robust economic activity and the associated high inflation may be sustained and in fact might not be transitory," he said, expressing confidence in long-term inflation expectations that "appear to be well-anchored" but still leaving open the possibility for a stronger policy response.