Federal Reserve's Neel Kashkari has stated that it's too early to declare victory on inflation.
In an interview with the Wall Street Journal, Kashkari emphasized that the risk of tightening monetary policy too much is a better option than doing too little.
“Undertightening will not get us back to 2% in a reasonable time,” Kashkari said.
He added that he remains worried that inflation will be “ticking up again. That’s what I’m worried about.”
More precisely, he is worrying about inflation “settling somewhere north of 2%, and that would be very concerning to me.”
This perspective could be echoed by other Fed officials, countering the market's expectations of rate cuts by mid-2024. In case this scenario materialized, we could see stocks moving lower and paring back some of last week’s robust gains.
The Fed decided to maintain its current interest rates at the recent policy meeting. Investors interpreted remarks by Fed Chair Jerome Powell as indicating that the central bank is done raising interest rates.
Moreover, the Labor Department's report last Friday revealed that the U.S. economy added 150,000 jobs in October, and the unemployment rate increased to 3.9%. It was also disclosed that the economy had generated fewer new jobs in the previous two months than initially reported, indicating a softer job market.
Still, Kashkari is “not ready to say we are in a good place.”
Kashkari holds a voting position on the Federal Reserve's policy committee, which plays a critical role in determining the direction of interest rates and other monetary policy decisions.