Neel Kashkari stressed that efforts to reduce inflation in the United States (US) remain the top priority of the Federal Reserve (Fed) while consumer price pressures remain high.
The Minneapolis Fed President said inflation is still far above the Fed's 2% target even though the US labor market is currently stable and strong. This situation has caused the US central bank to remain cautious in determining the direction of monetary policy.
According to Kashkari, the Fed will continue to take a balanced approach between ensuring price stability and maintaining the strength of the labor market. However, the main focus at present is more on efforts to control inflation that has continued to exceed the target for more than five years.
He also warned that inflation that remains high for too long could cause consumer inflation expectations to become increasingly difficult to control. This situation risks forcing the Fed to take more aggressive action, including raising interest rates in the future.
The latest data shows that US headline inflation rose to 3.8% in April. Meanwhile, core inflation that excludes food and energy prices also remains high, reflecting that price pressures are still widespread in the world's largest economy.
Kashkari explained that the current global inflationary pressure is influenced by several main factors including the impact of the Covid-19 pandemic, trade tariffs, the Ukraine war and the geopolitical conflict in Iran.
He also emphasized that rising energy and fertilizer prices are now among the main drivers of global inflation. The rising costs are seen to be starting to affect other sectors of the economy and have the potential to cause price pressures to become more widespread.
Kashkari's statement once again reinforced expectations that the Fed may keep interest rates high for longer to ensure that inflation is truly back under control.
