The Federal Reserve must maintain its credibility on inflation, Federal Reserve Bank of Minneapolis President Neel Kashkari told an audience Monday.
It matters that the Fed has been short of its inflation goal, he said in a speech livecast. “It matters that investors believe the Fed can achieve its goals, because, then, if there’s a future crisis and we really need people to believe in us, we’ve earned and established that credibility.”
Despite lower inflation, he said, the Fed isn’t seeing wages rise. While the Fed looks at a lot of data, Kashkari said “data becomes more meaningful” when he gets out and talks to businesspeople. “I’m asking everyone, ‘Why aren’t you raising wages?’”
While the local economy is considered in the Fed’s decisions, Kashkari reminded the audience, “We can’t target separate interest rates” for every community, it has to make decisions for the entire nation.
Productivity may be boosted by the emergence of self-driving cars and trucks, he predicted, noting it could also cause “disruption” for those who make a living driving a car or truck.
The Fed’s balance sheet normalization “won’t disrupt markets," Kashkari said, since it will be done slowly and the plans were already made public, so there would be no surprises.