The Fed must avoid cutting rates early — Neel Kashkari

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Minneapolis Federal Reserve (Fed) President Neel Kashkari said on Wednesday that the Fed should avoid cutting the policy rate prematurely and sending inflation skyrocketing again, Reuters reported.

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“It is appropriate to continue raising interest rates at least for the next few meetings until we are confident that inflation has peaked.”

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“There are increasing signs that inflation may have peaked.”

“The Fed should then maintain the interest rate target and says that its forecast is that it would be at 5.4%.”

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“We won’t know if it’s high enough until the Fed pauses for a reasonable period of time.”

“Once the Fed takes into account the lagged effects of policy, it will be able to assess whether rates should rise or stay at their peak for longer.”

“At this stage, any sign of slow progress in reducing inflation will require driving the policy rate potentially much higher.”

“The Fed can consider cutting rates only when it is satisfied that inflation is on track to return to the 2% target.”

Market Reaction

The dollar index showed no immediate reaction to these comments and lost 0.6% on the day to settle at 104.05.

Source: Fx Street

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