Minneapolis Federal Reserve President Neil Kashkari said on Friday that the U.S. Warnings that inflation will rise are not supported by any evidence and are tantamount to “ghost stories”.
It has been said since 2008 that once inflation started to rise, it would accelerate, and its policy would force the Fed to slash the brakes by sharply raising interest rates, Kashkari said. In an essay posted on their regional bank website.
These theories are similar to ghost stories because there is no evidence that they are true yet they cannot be denied, he said.
Some economists worry that the consumer price index is signaling lower inflation.
In the last three months, the CPI has been growing at an annual rate of .3 %%, the highest rate since 2008-2008. Core CPI, which excludes food and energy prices, is the highest since 1991.
In a separate interview Friday, Atlanta Fed President Rafael Bostick said the COVD-19 epidemic has made “a lot of noise” in inflation data.
“Monthly-to-month and quarter-to-quarter, elements of the CPI are showing broad swings … so it’s hard to know what signal we’re seeing right now,” Bostick said in an interview on Bloomberg Television.
Financial markets did not react further to the Fed’s pledge to allow inflation to meet its target, and analysts said this was due to the fact that price levels have been so calm in recent years.
St. Louis Fed President James Bullard said Friday that Wall Street’s dissatisfaction with inflation could be put to the test.
“I think you’ll see more inflation than in the pre-epidemic era. When inflation was very low, ”he said.
In a discussion sponsored by the Boeing Center for Supply Chain Innovation at the University of Washington in St. Louis, Bullard said there are a number of factors that could push up sentiment levels: a more relaxed Fed, a huge fiscal deficit and a possible disruption to 30% in the June-September quarter. Growth rate is expected.
Kashkari said that if he returned, inflation would be a “high-class problem” for the Fed.
That’s because the Fed knows how to control higher inflation – the problem is that the central bank has limited tools to fight low inflation.
Kashkari noted that persistently low inflation is challenging advanced economies around the world.
This week, the Fed unveiled the final pieces of its strategy to avoid falling into the grip of low inflation.
Read:The Fed’s last stand: the battle to stay strong
The FOMC said it would keep interest rates close to zero “until the labor market gets maximum employment and inflation reaches its 2% target” and has been on track to be above 2% for some time.
At its policy meeting on Wednesday, Kashkari disagreed with the Fed’s new forward guidance. He proposed in plain language that the FOMC “expects to maintain the target limit on a sustained basis until core inflation reaches 2%” and that he maintains “sustainable standards” in this environment for about a year.
Kashkari said his alternative forward guidance is stronger than the statement adopted.
The Minneapolis Fed president said the FOMC does not need to mention employment in its next guidelines and that it reduces the risk of lower prices in the labor market.
Under his proposal, “we will only withdraw when we show that we are really at maximum employment because we have to bear a figure of more than 2% or more on a fixed basis to sustain core inflation.”