Fed's Kashkari: Talk of a pivot is premature

According to Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, the Fed's current tight policy is unlikely to change, even though Kashkari himself is a proponent of raising interest rates by fewer basis points than the current hikes are. 

He also stressed that at the moment everyone is united by the desire to reduce inflation to 2%. However, he understands that before the impact of the measures taken against inflation is fully felt, it will take some time. Since monetary policy doesn't work overnight, interest rates will continue to rise. Another question is how much higher it will grow.

Last week, the Fed held another interest rate hike. This time, the rate was increased by 75 basis points to 3.75-4%. While it’s clear from the actions of Jerome Powell, Fed Chair, that no such sharp hikes are expected in the future, it won’t be possible to abandon hikes altogether. It’s likely that the rate will rise even after reaching 4.6%, which a couple of months ago was considered the maximum.

According to Kashkari, the Fed is currently pursuing two non-contradictory goals. The first is stable prices, and the second is an increase in employment. Changing the Fed's current policy course is possible only in case the goals conflict, but there is still a long way to go before it happens.

The next Fed meeting is in mid-December. Neel Kashkari doesn’t make definite predictions on how much the interest rate will be raised. According to him, it could be 50, 75 or even more. The increase will be discussed.