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MNI BRIEF: Kashkari Sees 4.5% Fed Rate, Little Need To Pivot


The Federal Reserve will likely continue with aggressive rate hikes to at least 4.5% and hold borrowing costs for a while to make sure inflation is clearly headed back to target, Minneapolis President Neel Kashkari said Wednesday, seeing little chance of an economic slowdown that would require a policy reversal.

“We need to bring demand down to match supply,” he said during a question-and-answer session. "If the economy entered a steep downturn, we could always stop what we’re doing, we could always if we needed to reverse what we’re doing, if we thought that inflation was headed back down very quickly.”

“For me the bar for such a change is very high because we have not yet seen much evidence that the underlying inflation," is softening, he said. “A much more likely scenario is we will raise to some level north of 4%, maybe 4.5, and then pause and sit there for an extended period of time," he said. Investors see the Fed hiking another 75bps at its next meeting, in part because officials see the job market cooling without major layoffs. (See: MNI INTERVIEW: Fed Cheers Cooling Labor Demand)

MNI Ottawa Bureau | +1 613-314-9647 |
MNI Ottawa Bureau | +1 613-314-9647 |

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