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MNI BRIEF: Fed's Kashkari - Supply Issues Key To Rate Path

(MNI) Washington
(MNI) Washington
USPolicyFederal ReserveBriefNorth AmericaStoryRegionCentral Bank
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Persistent supply chain problems could force the Federal Reserve to raise interest rates more than expected to levels above what officials consider neutral, Minneapolis Fed President Neel Kashkari wrote in an essay on Friday, two days after the Fed raised interest rates by a half percentage point.

"If supply constraints unwind quickly, we might only need to take policy back to neutral or go modestly above it to bring inflation back down," he wrote. "If they don’t unwind quickly or if the economy really is in a higher-pressure equilibrium, then we will likely have to push long-term real rates to a contractionary stance to bring supply and demand into balance."

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Persistent supply chain problems could force the Federal Reserve to raise interest rates more than expected to levels above what officials consider neutral, Minneapolis Fed President Neel Kashkari wrote in an essay on Friday, two days after the Fed raised interest rates by a half percentage point.

"If supply constraints unwind quickly, we might only need to take policy back to neutral or go modestly above it to bring inflation back down," he wrote. "If they don’t unwind quickly or if the economy really is in a higher-pressure equilibrium, then we will likely have to push long-term real rates to a contractionary stance to bring supply and demand into balance."