Essay from the Fed's Kashkari
- Favors not raising rates until core inflation at 2%
- Fed should proceed with caution before tightening further
- Fed hikes are likely driving down inflation expectations
- I believe the most likely causes of persistently low inflation are additional domestic labor market slack and falling inflation expectations
- The economy would likely have performed better had the Fed not removed accommodation
- The only explanation that would potentially call for further policy tightening is the transitory factor explanation. But the longer low inflation persists (here and around the world), the more tenuous that story becomes.
None of this is a surprise, Kashkari has said all these things before. You could argue that he's starting to make the argument a bit more forcefully.
Update: After a read through the essay, I suggest everyone check it out. He makes a well-argued, clear point about inflation and says it's the Fed's fault that inflation is low globally.
