By Greg Robb
Past efforts to bring down inflation have ended up tipping the economy into recession and it is still unclear if the Federal Reserve can avoid that outcome in this cycle, said Minneapolis Fed President Neel Kashkari on Thursday.
“So the question right now is, can we bring inflation down without triggering a recession? And my answer to that question is: I don’t know,” Kashkari said, during a talk with business leaders in Minneapolis.
He said he didn’t think the economy was in a recession right now.
It is clear the Fed “has more work to do in raising interest rates to bring inflation down,” he added.
The labor market remains very strong, wages are rising and so are a lot of other fundamentals. This means the Fed could probably do more, Kashkari noted.
Earlier Thursday, St. Louis Fed President James Bullard told the Wall Street Journal he is leaning toward supporting a 0.75 percentage point rate hike in September.
This would be the third consecutive unusually large interest rate hike by the Fed and would bring its Fed’s benchmark rate up to 3%-3.35%.
Some other Fed officials have said they are leaning toward a half percentage point hike though at the September meeting. Bullard is a voting member of the Fed’s interest-rate setting committee this year, while Kashkari will be a voter in 2023.
Kashkari has said he sees the need to raise the Fed’s policy rate to 3.9% by the end of the year and to 4.4% by the end of 2023. Bullard also wants to get the Fed’s benchmark rate to close to 4% this year.
U.S. stocks /zigman2/quotes/210598065/realtime DJIA -0.65% /zigman2/quotes/210599714/realtime SPX -0.65% were mixed in trading on Thursday. The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +2.12% was down slightly to 2.88%.