(Bloomberg) - Federal Reserve Bank of Minneapolis President Neel Kashkari said he supports two interest-rate increases this year to counter risks posed by inflation.
“I brought forward two rate increases into 2022 because inflation has been higher and more persistent than I had expected,” Kashkari said Tuesday in an essay posted on the Minneapolis Fed’s website.
Kashkari has been the Fed’s most dovish policy maker since taking the top job in Minneapolis in 2016. His shift underscores the widespread agreement among Fed officials on the need for action this year to counter the increase in the inflation rate, which in the 12 months through November was highest in almost four decades.
The U.S. central bank’s policy-setting Federal Open Market Committee, on which Kashkari sits but does not hold a vote this year, published anonymous projections at the conclusion of its Dec. 14-15 meeting showing all participants expected it would be appropriate to begin raising the federal funds rate from its current near-zero level sometime in 2022.
That marked a shift from the last round of projections in September, which at the time showed nine participants favored holding the benchmark rate near zero at least until 2023. It reflects increasing concern among Fed officials about the risk that the current bout of inflation, which they still largely expect to subside later this year as the pandemic recedes, may become more persistent.
“Fundamentally, I believe it is more likely we end up back in the low-inflation regime that we were in for 20 years than a new high-inflation regime,” Kashkari said. “However, the costs of ending up in the high-inflation regime are likely larger than the costs of ending up back in the low-inflation regime.”
By Matthew Boesler
