Fed’s Kashkari maintains rate hike expectations at 5.4% after jobs report

Minneapolis Federal Reserve Chairman Neel Kashkari said Tuesday that the Federal Reserve will likely have to raise interest rates to at least 5.4% to control inflation, as the latest jobs report for January shows that Measures taken so far have done little to dent the labor market.

“I think it has surprised us all”, Kashkari said in an interview with CNBC, referring to the employment report released on Friday, in which the US government reported more than half a million new jobs.

“He tells me that, so far, we’re not seeing much of an imprint…in the labor market…it’s pretty tenuous so far, so I haven’t seen anything yet to lower my rate trajectory.”

kashkarione of the most aggressive US central bank officials in its assessment of how far interest rates should rise, said a month ago that it expected the policy rate to stop at 5.4%.

The president of the Federal ReserveMr. Jerome Powell will speak later on Tuesday at 1740 GMT, with investors eager to hear if his assessment of the economy has changed.

Last week, the Federal Reserve raised its key interest rate by a quarter of a percentage point, to a range between 4.5% and 4.75%, but Powell reiterated at the time that the fed It is considering a pause in the range between 5% and 5.25%, which it considers sufficiently restrictive in its fight against inflation, which stands at more than double the Federal Reserve’s 2% target.

However, the January jobs report dashed investor expectations of an earlier pause, after the economy created far more jobs than expected and the unemployment rate fell to 3.4%, the figure lowest since 1969.

kashkari He pointed to other concerns emanating from such a strong labor market, including a very robust service sector and wages that continue to grow faster than is consistent with the Fed’s inflation target, at a time when inflation is expected to grow. The Fed’s most aggressive rate hike cycle in 40 years is sapping demand in the economy.

“It’s hard to imagine seeing very strong job growth while wage growth moderates, and that’s what I’m looking for.” Said kashkari. “We have not seen any progress so far, practically no progress in basic services excluding housing, and that is very much tied to the labor market.”.

On Monday, the president of the fed Atlanta chief Raphael Bostic said the central bank may have to raise borrowing costs more than anticipated given the unexpected rise in employment, noting that while a half percentage point rate hike was not his base case, could be considered.

kashkari He also expressed concern about the possibility that the easing of financial conditions will complicate the task of the Federal Reserve. “On the sidelines, it does concern me individually. I don’t think it’s a good thing that mortgage rates have gone back down…it makes our job of balancing the economy harder.”

Source: Reuters