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REPEAT:MNI POLICY: Fed's Kashkari: Still Don't See Overheating

Repeats Story Initially Transmitted at 21:49 GMT Sep 5/17:49 EST Sep 5
By Sara Haire
     WASHINGTON (MNI) - Minneapolis Federal Reserve Bank President Neel Kashkari
said that he still believes the economy is not overheating yet, prompting him to
continue his objection to rate increases. 
     In comments at a town hall forum in Bozeman, Montana on Wednesday, Kashkari
explained that the Federal Reserve remains in the midst of a debate on whether
there is still slack left in the labor force. According to Kashkari, "the fact
that inflation has been very low" and that "wage growth has been muted" would
suggest that we are not overheating.
     The core PCE price index year/year hit the Fed's 2% target in July and the
core CPI year/year measure has been hovering near 2% as well. Kashkari explained
that despite there being discussions about whether these inflation measures are
accurately reflecting pricing pressures, "most measures are not perfect." As a
result, he noted that officials "look at a lot of different measures" and
economists are always looking for ways to improve the inflation measures.
     Kashkari defended the Federal Reserve's policy of setting interest rates
for the country as a whole, acknowledging that there are regional differences in
terms of inflation and employment, but "we're one country."
     --CORPORATE RISKS
     On a separate note, Kashkari touched upon the anniversary of Great
Recession. He explained that the tools the Fed used following the major
financial crisis, including using taxpayer money to bail out banks, is not
something they want to do again.
     He said that the financial environment is safer now than it was 10 years
ago, but "the winds are blowing in a deregulatory direction" when they should be
moving in the opposite. He also said that he recognizes that there will be
failures, but if a "giant, trillion dollar bank fails, it could bring down the
U.S. economy," he said.
     Kashkari also said that both former Chair Janet Yellen and current Fed
Chair Jerome Powell have done an "outstanding job" in communicating how the Fed
is going to unwind the balance sheet. He added that he would personally "be
nervous" about undoing that clarity and unsettling market expectations.
--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com

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