ADVERTISEMENT

FED'S KASHKARI: There are a few simple reasons why I voted to keep rates on hold

The January meeting was Kashkari's first as a voting member.

Neel Kashkari, the Treasury Department's interim assistant secretary for financial stability, waits to speak about a plan to ease mortgage payments for troubled borrowers through mortgage finance giants Fannie Mae and Freddie Mac during a news conference in Washington November 11, 2008.

In keeping with his image of a youthful, media-savvy Federal Reserve bank president, the Minneapolis Fed’s Neel Kashkari took to Medium Tuesday to discuss his reasoning for keeping interest rates on hold, as the central bank unanimously chose to do last week.

ADVERTISEMENT

His argument was fairly straight forward: Why tighten monetary conditions when inflation remains below the Fed’s target, inflation expectations are subdued, and the job market is probably still not operating at its full potential despite the low jobless rate?

“The following chart shows both headline and core inflation for the past 10 years. You can see that both have been below our 2% target for several years,” Kashkari writes. Core inflation excludes volatile food and energy costs.

“Twelve-month core inflation is at 1.7%, and while it seems to be moving up somewhat, it is doing so slowly, if at all. It is still below target, and, importantly, even if it met or exceeded our target, 2.3% should not be any more concerning than the current reading of 1.7%, because our target is symmetric.”

ADVERTISEMENT

Another source of concern for Kashkari: “

In

In addition, while the official unemployment rate is at a historically low 4.8%, low participation and high long-term unemployment are still problematic. "The U-6 measure suggests that there may still be additional workers who might re-enter the labor force if the job market remains healthy,” wrote Kashkari, referring to a broader jobless rate that includes discouraged workers and those working part-time but want a full-time job.

Add to that the uncertainty generated by some of the recent political chaos in Washington, and the case for a near-term Fed rate hike becomes much less compelling.

FOLLOW BUSINESS INSIDER AFRICA

Unblock notifications in browser settings.
ADVERTISEMENT

Recommended articles

Sony’s creators convention redefines the creative landscape for content creators

Sony’s creators convention redefines the creative landscape for content creators

Egypt, Nigeria, and South Africa ranked as Africa's most polluted countries in new report

Egypt, Nigeria, and South Africa ranked as Africa's most polluted countries in new report

10 African countries with the lowest life expectancy according to the World Bank

10 African countries with the lowest life expectancy according to the World Bank

Kenyan women are more obese than their men - here’s why

Kenyan women are more obese than their men - here’s why

Africa’s richest man Dangote stands between Europe and $17 billion in revenue

Africa’s richest man Dangote stands between Europe and $17 billion in revenue

After months of exchanging blows, Kenya and Uganda takes steps towards resolution

After months of exchanging blows, Kenya and Uganda takes steps towards resolution

Africa's first black billionaire could join $2.9 billion Vivendi bid for MultiChoice

Africa's first black billionaire could join $2.9 billion Vivendi bid for MultiChoice

10 most dangerous African countries in 2024

10 most dangerous African countries in 2024

Russia’s nuclear influence expands further north of Africa

Russia’s nuclear influence expands further north of Africa

ADVERTISEMENT