By Michael S. Derby
NEW YORK (Reuters) – Federal Reserve Bank of Minneapolis President Neel Kashkari said on Wednesday it is not clear yet whether the central bank is finished raising rates amid ample evidence of ongoing economic strength.
Speaking on CNBC, Kashkari said he is not yet ready to say rates have been lifted enough to get inflation back to the 2% target. He said that he expects the U.S. central bank to hold rates steady next year after a likely final rate rise this year.
Kashkari, who spoke in the wake of last week’s Fed meeting that left the central bank’s federal funds rate unchanged at between 5.25% and 5.5%, said the data will drive future central bank policy decisions. And he noted what is happening in the economy makes it unclear whether monetary policy is in a place to bring inflation down as quickly as it needs to come down.
“One thing that makes me cautious that we might not be as restrictive as we think” is the strength of consumer spending coupled with still strong gains in overall economic activity, amid the resilience of the housing and auto sectors even in the face of much tighter monetary policy, Kashkari said.
“We are allowing the data to come to us to try to figure out how much effect do we have in the economy and whether or not we need to do more” with rate policy, Kashkari said.
In the Fed’s latest forecasts, officials continued to pencil in one more rate hike for this year, and said they expect the rates to be higher for longer given that the economy is performing more strongly than their expectations relative to the early summer.
(Reporting by Michael S. Derby, Editing by Louise Heavens and Anil D’Silva)