Federal Reserve Bank of Minneapolis CEO says inflation is ‘very worrying’ and is ‘spreading’ in the economy

federal Reserve Bank Minneapolis CEO and President Neil Kashkari said on Sunday that the current state of inflation is “very worrying” and “is spreading more widely in the economy.”

“It’s very worrying,” Kashkari said during an appearance on CBS’s “Face the Nation.” We’ve got inflation readings, new data that comes in as recently as this past week, and we keep wondering. It’s ours. more than expected.” “And it’s not just certain categories. It’s spreading more widely in the economy and that’s why the Federal Reserve is working so quickly to get it under control and get it back.”

Kashkari stressed that although wages are rising for many Americans, so are the costs of goods and services, meaning workers experience “real pay cuts” because Inflation is rising so fast. He added that wage-driven inflation is not happening, and the cost of goods is partly due to disruptions in the supply chain, namely due to the pandemic and now the war in Ukraine.

“For most Americans, their wages are rising, but they aren’t growing as fast as inflation, so the real wages, real incomes of most Americans, are going down,” he said. “They’re getting a cut in real wages because inflation is rising so fast. I mean, generally, we think of wage-driven inflation, where wages rise quickly and that leads to a self-fulfillment spiral. Higher prices happen – which is not happening yet. Higher prices and wages are now trying to catch up to those higher prices. Those higher prices are now being driven by the war in Ukraine between supply chains and other factors . And so we need to bring the economy back into balance before it really becomes a story of a very wage drive inflation.”

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Neil Kashkari, Federal Reserve Chairman for Minneapolis

Minneapolis Federal Reserve Chairman Neil Kashkari visits “Maria Bartiromo’s Wall Street” at Fox Business Network Studios on March 29, 2019 in New York. (John Lampersky / Getty Images / Getty Images)

Looking at recent results from the Economic Cost Index, he stressed that it’s a good thing Americans are earning more, but the Federal Reserve can’t wait to adjust the supply chain to bring down prices.

“Just at its basic level, inflation is when demand exceeds supply. We know there is less supply because of supply chains, because of the war in Ukraine, because of COVID. We expected supply to come online more quickly. This has not happened,” Kashkari said. “So, we have to reduce the demand in equilibrium. Now, I hope we get some help on the supply side, but that doesn’t change the fact that the Federal Reserve has its job, and we’re committed to doing it.”

“We cannot wait until the supply is fully recovered. We have to do our bit with monetary policy,” he said.

Kashkari argued that the new bill introduced by censors Chuck Schumer, D.N.Y., and Joe Manchin, D.W. VA, dubbed inflation reduction act Inflation is “not going to have much of an impact” over the next several years, and it will be the job of the Federal Reserve to adjust monetary policies to bring it down.

Neil Kashkari at Yahoo Finance Summit

Moderator Brian Cheung and banker Neil Kashkari attend the Yahoo Finance All Markets Summit at Union West Events on October 10, 2019 in New York City. (Jim Spelman / Getty Images / Getty Images)

“In the short term, the side effects of demand outweigh the side effects of supply. And so, when I look at a bill that is believed to have been talked about by two of your senators, my guess is the next In a few years, it’s not going to have a huge impact on inflation,” he said. “It won’t affect how I analyze inflation over the next few years. I think it may have some impact in the long term, but in the near term we have a sharp mismatch between demand and supply, and that It’s really up to the Federal Reserve to be able to reduce that demand.”

The White House has repeatedly held back from acknowledging that US economy in recession And debating the definition of the word. On Sunday, Kashkari argued that inflation is so bad that it doesn’t matter whether we use the word recession or not, and serious work needs to be done to address it.

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“Fundamentally, the labor market appears to be very strong, while the GDP, that the economy is producing, appears to be shrinking. So, we are getting mixed signals from the economy. From my point of view, keeping inflation under control. In terms of whether we are technically bearish or not, that doesn’t change my analysis,” he said. “I’m focusing on the inflation data. I’m focusing on the wage data. And so far, inflation is surprising us on the upside. Wages keep going up. So far, the labor market is pretty strong. And that means whether or not we’re technically in a recession doesn’t change the fact that the Federal Reserve has its job.”

“We are far from getting the economy back to 2% inflation. And that’s where we need to get to,” Kashkari said.

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