Minneapolis Fed president calls for continued rate hikes to bring inflation back in line

An official of the American central bank (Fed) considered Monday necessary to continue to raise the rates, judging that there remains work to bring back inflation in the nails.

“There’s still a long way to go before we get inflation back to 2%, and we at the Federal Reserve likely still have some work to do on our end,” said Neel Kashkari, chairman of the Minneapolis Fed, which has this year rotating voting rights at meetings. At the end of March, he had already deemed it necessary to raise rates again.

The next Fed meeting will be June 13-14. The possibility of a pause in rate hikes is on the table.

“Don’t be fooled by a few months of positive data. We are still well beyond our 2% inflation target, and we need to finish the job,” he said.

Indeed, he pointed out, inflation has certainly started to slow, but “the labor market remains tight, and we haven’t seen much of a slowdown” on that front.

Another official, Chicago Fed President Austan Goolsbee, also a voting member, was more cautious on Monday, saying that “much of the impact (of the rate hikes already made ) is still in the pipeline” and therefore the economy will continue to slow.

While a drop in job creation and a rise in the unemployment rate are expected to curb high inflation, the market unexpectedly rebounded in April, with 253,000 jobs created, compared to 165,000 in March , and a drop in the unemployment rate to 3.4%.

The labor shortage in the country has indeed contributed to fueling inflation, as wages have risen sharply.

However, weekly jobless claims climbed in early May, reaching their highest level since October 2021.

Inflation slowed slightly in April, to 4.9% over one year from 5.0% in March, according to the CPI index. Over one month, however, it rebounded to 0.4% against 0.1% in March.

However, the Fed favors another measure of inflation, the PCE index, whose data for April will be published on May 26.

To curb high inflation, the Fed has, since March 2022, raised its main key rate by 5 points, from 0 to 0.25%, to 5.00-5.25%. This leads banks to raise the cost of the loans they offer to households and businesses, weighing on consumption and investment.