Federal Reserve may need to push policy rate above 4.75%: Kashkari

THE Federal Reserve may need to push its benchmark policy rate above 4.75 per cent if underlying inflation does not stop rising, Minneapolis Federal Reserve Bank President Neel Kashkari said on Tuesday.

“I’ve said publicly that I could easily see us getting into the mid-4 per cents early next year,” Kashkari said at a panel at the Women Corporate Directors, Minnesota Chapter, in Minneapolis.

“But if we don’t see progress in underlying inflation or core inflation, I don’t see why I would advocate stopping at 4.5 per cent, or 4.75 per cent or something like that. We need to see actual progress in core inflation and services inflation and we are not seeing it yet.”

Most Fed policymakers expect to need to raise the policy rate, now at 3 per cent- 3.25 per cent, to 4.5 per cent-5 per cent by early next year, based on projections published last month and comments made publicly since then.

Kashkari’s remarks signal a readiness to go even further.

“That number that I offered is predicated on a flattening out of that underlying inflation,” Kashkari said. “If that doesn’t happen, then I don’t see how we can stop.” REUTERS