MNI BRIEF: Hawkish Kashkari - No Tradeoff Amid Inflation Fight

The Federal Reserve must keep raising interest rates in an economy dominated by high inflation and it will be a long time before policymakers must debate any tradeoff with its full employment goal, Minneapolis President Neel Kashkari said Tuesday, in comments that showed just how hawkish an official that was considered a key dove on the FOMC has become.

“Right now there’s nothing remotely balanced about this” with the economy seeing very high inflation and maximum employment, he said during a question-and-answer session. "We need to err on making sure we’re getting inflation down, and only relax when we see compelling evidence that inflation is well on its way back down to 2 %."

Kashkari has been joined by other FOMC colleagues in fighting back against market bets the Fed will need to cut next year as the economy softens. (See: MNI INTERVIEW: Kohn Sees Upside Risks To Fed Funds Rate Peak) Two-year Treasuries were little changed around yields of 3.33% after the remarks, though markets have generally turned jittery ahead of this week's Jackson Hole Symposium.

“When inflation is 8% or 9% we run the risk of un-anchoring inflation expectations” and “very bad outcomes,” Kashkari said.