The chairman of the Federal Reserve Bank of Minneapolis, Neel Kashkari, stressed that the US Federal Reserve should not overreact to rising inflation, although the latter is causing pain to Americans, as it will probably prove to be temporary.
“The high prices paid by families are real and people are in financial pain right now,” Kashkari told CBS News on Sunday.
“We have to take it very seriously, but in my view we also have to not overreact to some of these temporary factors, even though the pain is real,” he added.
The consumer price index in the US for October stood at 6.2% on an annual basis, at its highest price in 31 years.
Fed policymakers announced on November 3 that they would begin cutting back on asset purchases from the pandemic to boost the economy while keeping the key interest rate in the 0% range – 0.25 %.
Kashkari said the Fed’s move was “appropriate”, as an excessive withdrawal of support could lead to a blow to the economy instead of helping to curb inflation.
“When we adjust monetary policy, the results come with a slight delay,” he was quoted as saying by Bloomberg. “So if we overreact to a temporary price increase, we could pull the economy back in the long run.”
The surge in demand, according to Kashkari, who does not have a vote in the Fed’s monetary policy committee this year, is linked to fiscal expansion in the past, but also to supply chain problems, which will fade over time.
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Source From: Capital
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