Skip to content
Subscriber Only
Markets
Economics

Kashkari Says New Fed Plan Could Lead to Repeat of Past Mistakes

  • Fed shouldn’t tighten without a year of 2% inflation: Kashkari
  • New guidance may not prevent early tightening again, he says
Neel Kashkari
Neel KashkariPhotographer: David Paul Morris/Bloomberg

The Federal Reserve’s new guidance about when it will raise interest rates leaves the door open to premature tightening of monetary policy again and should be replaced with a stronger commitment to fulfill its mandates, Minneapolis Fed President Neel Kashkari said.

“Not raising rates for roughly a year after core inflation first crosses 2% is consistent with a strategy of aiming for a modest overshoot in order to achieve average inflation of 2%,” Kashkari said Friday in an essay posted on Medium.com. “We would only lift off once we had demonstrated that we really were at maximum employment, because core inflation would have had to actually hit or exceed 2% on a sustained basis in order to lift off.”