In an interview with MarketPlace, Minneapolis Fed President Neel Kashkari openly reiterated his view that Fed is “raising interest rates too aggressively”. And he warned that “we might keep raising interest rates and the economy can’t take it and we put the country into recession.” And for now, he added that “I don’t see any indication that we’re running above potential so let’s let it keep running and if we start to see signs that it’s overheating we can always raise rates then.” Kashkari admitted there an “honest disagreement about this very fundamental question” with his Fed colleagues.
He also pointed out Fed got “scarring” from financial crisis. And the bigger one was from the “inflation of the 1970s”. The scarring is the reason so biased towards high inflation. While Fed said it’s having a “a symmetric view of inflation”, in what it actually does, Kashkari said, “we are much more worried about high inflation than we are low inflation.”
On the cause of the next financial crisis, Kashkari said it could be “a spark in emerging markets” like Turkey. Or it could be Fed, overdueing interest rates or overdoing interest rates. And, “it could be something coming from the trade battles that are being taken right now.
