Fed’s Kashkari and Hammack explain their dissents at the last meeting. Inflation too high
Fed’s Kashkari and Hammack are speaking and explaining their dissents at the last meeting in favor of a 25 basis point rate hike, arguing that inflation risks remain elevated and that a series of gradual policy moves would be more effective than waiting until larger hikes become necessary.
- Dissented at the FOMC meeting, preferring to raise the federal funds rate by 25 basis points.
- More recent data center investment has added a new demand element to inflation.
- A series of supply shocks has been responsible for part of the inflation problem.
- Increasingly believes monetary policy has a role in addressing successive supply shocks that could lead to entrenched inflation.
- Monetary policy can look through individual supply shocks, but not an ongoing series of them.
- Wants to manage the risk of inflation becoming entrenched and would prefer to tighten policy incrementally.
- If inflation durably fades, a strategy of small steps would allow the FOMC to slow or pause further tightening without unnecessary damage to the real economy.
- If inflation remains elevated, a series of small policy moves would be preferable to waiting and then concluding that much larger actions are required.
Hammack dissented because she believes policy is still not restrictive enough and that the Fed should move now to bring inflation back under control.
- Inflation has been too high for too long.
- Not confident inflation will ease without additional Fed action.
- Now is the time for the Fed to act to bring down high inflation.
- The longer inflation remains elevated, the harder it will be to return it to the Fed’s target.
- With the labor market still stable, the Fed should keep its focus squarely on inflation.
- The current policy rate is not restrictive enough.
Kashkari and Hammack are two of three dissenters. Feds Lorie Logan is the third and is expected to speak as well today.
This article was written by Greg Michalowski at investinglive.com.