Daily Management Review

Kashkari Of Fed Recommends A Wait Before Interest Rate Hike


03/01/2018


Market needs to be allowed to work as people need to find job to use up the “slack” in the labour market. However, if the interest rates are to be increased, the ongoing process of employee hiring would be slowed down.



Following the statement made by Jerome Powell, the chairperson of Federal Reserve, to Congress, wherein he revealed his “confidence” boost with a “strengthening economy” along with the rising “inflation and wages”, one of Powell’s colleagues was for a wait before hiking the interest rate till “those increases are obvious”.
 
In the words of “Minneapolis Federal Reserve President”, Neel Kashkari:
 “I want wage growth to continue to build, I want to see inflation move toward our 2-percent target, I want to see more evidence that the slack in the labor market is being used up: those are going to be the key factors that I pay attention to in making my recommendation”.
 
As per the traders and investors, Powell, as the chairperson of Fed, is likely to complete “his first policy-making meeting” of hiking interest rates along with a “promise of at least two and possibly three more rate increases this year” by the coming month. As per Kashkari’s statement echoing “dovish views” which he has been harbouring for over a year, Powell’s move could get the latter into “some opposition to further tightening begun under his predecessor Janet Yellen”, at the least.
 
Given the tight situation of the labour market, employers are being encouraged to hire workers, which otherwise been outside the periphery of their consideration, as some workers being hired hold “drug problems or criminal records”, reports Kashkari.
 
Interest rate hike would slower the process as companies may find it expensive to “operate and expand”. He urged:
“We need to let the market work and allow people to find jobs and allow wages to grow. I think we should let the process continue.”
 
 
References:
reuters.com







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