Kashkari Calls for Interest Rate Hike to Combat Inflation

Minneapolis Federal Reserve President Neel Kashkari believes the central bank should raise interest rates now to curb persistent inflation and prevent an 'entrenched inflation problem'. He was one of three Fed policymakers who dissented from the decision to leave interest rates unchanged at last week's monetary policy meeting. The current benchmark federal funds rate has been steady all year, but Kashkari sees signs of strength across various components of the economy.

Corporate earnings are high, consumers are holding up, and the labor market is stable, according to Kashkari. He doesn't see evidence that current interest rates are suppressing activity, allowing for a small hike. 'I'm not calling for a dramatic increase in interest rates,' he explained. 'I'm simply saying I don't see evidence of monetary policy [being] marginally restrictive right now, and I think we have more work to do to get inflation back down.'

Kashkari cited the consumer price index (CPI) at 3.5% from a year ago and the personal consumption expenditures (PCE) index at 3.7% as evidence of stubbornly high inflation. He prefers to raise rates in small steps now rather than waiting for later, when the problem could become more entrenched and require aggressive rate increases.