Neel Kashkari, CEO and chairman of the Federal Reserve Bank of Minneapolis, said on Sunday that the current state of inflation is “very worrying” and “spreading more widely throughout the economy.”
“It’s very worrying. We keep getting inflation readings, new data coming in recently last week and we keep surprising ourselves. It’s higher than we expect,” Kashkari said during an appearance on “Face The Nation” of the CBS. “And it’s not just a few categories. It is spreading more widely throughout the economy and that is why the Federal Reserve is acting so urgently to keep it in check and bring it back down.”
Kashkari pointed out that while wages are rising for many Americans, so are the costs of goods and services, meaning workers are suffering a “real wage cut” because inflation is rising so rapidly. He argued that wage-driven inflation is not occurring and that the cost of goods is partly due to disruptions in the supply chain, particularly caused by the pandemic and now the war in Ukraine.
“For most Americans, their wages are going up, but they’re not going up as fast as inflation, so most Americans’ real wages, real incomes, are going down,” he said. “They are getting a reduction in real wages because inflation is rising so rapidly. I mean, generally, we think of wage-driven inflation where wages grow rapidly and that leads to higher prices in a self-fulfilling spiral,” which is not happening yet. High prices and wages are now trying to catch up with those high prices. Those high prices are now driven by supply chains and the war in Ukraine, among other factors. economy in equilibrium before it really becomes a story of inflation that drives wages a lot. “
POWELL UNDERTAKES THAT THE FED IS ‘CAREFULLY FOCUSED’ ON THE FIGHT AGAINST INFLATION
Noting recent economic cost index results, he pointed out that it is a good thing for Americans to earn more, but the Federal Reserve is looking forward to the supply chain adapting to lower prices.
“Only at its base level, inflation is when demand exceeds supply. We know supply is low due to supply chains, due to the war in Ukraine, due to COVID. We were hoping that the The offer would come online more quickly. That didn’t happen it happened, “Kashkari said. “So, we have to balance demand. Now, I hope we get some help on the supply side, but that doesn’t change the fact that the Federal Reserve has its job to do and we are committed to doing it.”
“We cannot wait for the offer to heal completely. We have to do our part with monetary policy,” he added.
Kashkari argued that the new bill introduced by sens. Chuck Schumer, DNY, and Joe Manchin, DW. Va., Nicknamed the Inflation Reduction Act, “will not have a major impact on inflation” in the coming years, and it will be up to the Federal Reserve to adjust monetary policies to reduce it.
“In the short term, the side effects of demand have completely overwhelmed the side effects of supply. And so, when I look at a bill that your two senators have been talking about, I suppose in the next couple of years it won’t have a great deal. impact on inflation, “he said. “It won’t affect how I analyze inflation over the next few years. I think in the long run it may have some effect, but in the short term we have an acute mismatch between supply and demand, and it’s really up to the Federal Reserve to be able to break down. this request”.
The White House has repeatedly refrained from admitting that the US economy is in recession and discussed the definition of the term. On Sunday, Kashkari said that inflation is so bad that it doesn’t matter if we use the term recession or not, and we need to work hard to tackle it.
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“Basically, the labor market appears to be very strong while GDP, which the amount the economy is producing, appears to be shrinking. So, we are receiving mixed signals from the economy. From my point of view, in terms of controlling the economy. ‘inflation, whether we are technically in a recession or not does not change my analysis, ”he said. “I focus on the inflation data. I focus on the payroll data. And so far, inflation continues to surprise us on the upside. Wages continue to rise. So far, the labor market is very, very strong. And that means that. whether or not we’re technically in a recession doesn’t change whether the Federal Reserve has its job to do. ”
“We are a long way from achieving an economy that is back to 2% inflation. And that’s where we need to get to,” Kashkari added.