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Opinion
Lisa Abramowicz

Fed's Kashkari Reveals an Uncomfortable Truth

The head of the central bank’s Minneapolis branch lays bare the risks to the U.S. economy from China’s lockdowns and a lingering war in Ukraine.

Minneapolis Fed President Neel Kashkari has a sobering message for the economy. 

Minneapolis Fed President Neel Kashkari has a sobering message for the economy. 

Photographer: Andrew Harrer/Bloomberg via Getty Images

Federal Reserve Bank of Minneapolis President Neel Kashkari published an essay Friday in which he admitted an uncomfortable truth. He wrote that if the supply-chain disruptions don't resolve soon, the U.S. Federal Reserve may be forced to spur a recession

Kashkari pointed to the war in Ukraine and lockdowns in China's related to Covid-19 as reasons why supply chains haven't returned to normal as quickly as many expected. And if factories, shipping lines and commodity producers don't start operating more smoothly in the near future, "then we will likely have to push long-term real rates to a contractionary stance to bring supply and demand into balance," he added. In other words, such an outcome would force the Fed to raise its target for the federal funds rate, currently a range of 0.75% to 1%, well above the 3% that is priced into the futures market by February 2023.