Federal Reserve Bank of Minneapolis President Neel Kashkari said he sees a 60% chance the US central bank can bring inflation down to its 2% target without causing severe damage to the economy.
In a letter published Tuesday on the Minneapolis Fed’s website, Kashkari laid out two potential scenarios for the Fed’s response to inflation going forward. One, the “soft-landing” path, would likely see policymakers raise rates once more before holding them steady in order to fully cool inflation. In the other, to which he ascribed a 40% likelihood, inflation would be more entrenched and require further rate increases to bring under control.
Officials last week left their benchmark interest rate unchanged in a range of 5.25% to 5.5%, the highest level in 22 years, and signaled rates will need to stay higher for longer to contain inflation. “If the economy is fundamentally much stronger than we realized, on the margin that would tell me rates probably have to go a little bit higher and then be held higher for longer to cool things off,” Kashkari said at an event at the University of Pennsylvania’s Wharton School.
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