U.S. central bankers are united in their determination to bring inflation down, and financial markets understand that, according to Reuters- Minneapolis Federal Reserve BankFederal Reserve Bank President Neel Kashkari.
There is a lot of tightening in the pipeline, Kashkari said in a WSJ Live interview that interest rate hikes already delivered but yet to have an impact on the U.S. economy and price pressures.
He said that we are moving at an appropriately aggressive pace because we recognize that there is the risk of overdoing it on the front end, and that we are committed to restoring price stability.
The Fed raised interest rates last week and signaled that more rate hikes are on tap in the fiercest battle with inflation in 40 years. Since then, the U.S stock markets have swooned and some global currencies have nosedived.
Kashkari believes markets have digested the Fed's intent to bring inflation down and that monetary policy will need to be tighter now, despite the fact that monetary policy is tight.
Kashkari said that the economy is sending us a lot of mixed signals right now. I believe that we need to keep tightening policy until we see some compelling evidence that underlying inflation is now three times the Fed's 2% target. And then I think we need to sit there and we need to wait for the tightening to work its way through the economy to see at that point. Have we done enough? The Fed would like to achieve a soft landing for the economy, but Kashkari said that the outcome depends on what happens with the supply side, which is out of the Fed's control, and in any event the Fed will do what it takes to bring inflation down.