With inflation below the Federal Reserve's 2% target, and employment near, but not quite at, it's long-term level, Federal Reserve Bank of Minneapolis President Neel Kashkari said Tuesday, he believes monetary policy is appropriate for now.
"We are still coming up somewhat short on our inflation mandate, and we may not have yet reached maximum employment," he said in an essay posted online. "Inflation expectations remain well-anchored. Monetary policy is currently somewhat accommodative. There don't appear to be urgent financial stability risks at the moment. There is great uncertainty about the fiscal outlook. The global environment seems to have a fairly typical level of risk (though that can change quickly). From a risk management perspective, we have stronger tools to deal with high inflation than low inflation. Looking at all this together led me to vote to keep rates steady."
He noted, "The FOMC has extraordinarily powerful tools to deal with a surprise burst of inflation. We can always raise rates, quickly and aggressively if need be. And my view is that there is strong commitment among FOMC participants to maintaining our 2 percent inflation target. However, the closer we are to the zero lower bound, the fewer tools we have to deal with a surprise of low inflation or economic weakness. From a risk management perspective, that suggests, if we are to err, it is better to err on the side of being more accommodative than being more restrictive."
