Below is a transcript of an interview Neel Kashkari (president and CEO of the Federal Reserve Bank of Minneapolis) conducted on Sunday, November 14, 2021. It aired on Face the Nation.
MARGARET BRENNAN Good morning.
PRESIDENT OF FEDERAL RESSERVE BANK MINNEAPOLIS NEEL KASHKARI : Good morning, MARGARET.
MARGARET BreNNAN: Neel. The core inflation-inflation rate is at a record high of 30 years. Is it possible to believe that we are at the peak of inflation or that it will get worse?
KASHKARI – The math suggests that we will see higher readings in the coming months, before they begin to taper off. We’re seeing both an increase in demand as Congress has given large amounts of money to families, businesses and individuals to help them get through the pandemic. However, we are also experiencing disruptions in supply as a result of the COVID viral infection. Both of these should be temporary, but the good news is that both should be temporary. These high prices that families pay, which are real and causing pain for many people, are the problem. We take this very seriously, but I believe it should be temporary, even if it is causing pain.
MARGARET BRENNAN – It is causing pain. But many Americans feel like they are being told that what they are experiencing is temporary. This is the same word that the Fed and White House keep using. You stated that we won’t see 2% inflation again until 2024. Why do you think it will take us so long?
KASHKARI, Well, I think both the supply and demand sides of these things will take some time to come together. It’s important that the Fed doesn’t set long-term monetary policies and adjust too much based only on temporary factors. We don’t expect to have to wait as long as we do. You see, some supply chains have sorted themselves out. Some take longer. We know that it takes time to bring more capacity online in the semiconductor and auto sectors. There will be sectors that will struggle for a while while others get back on track, so to speak. This is something we must pay close attention to. It is important to take this seriously. However, I believe we must not react too strongly to temporary factors even though they are real. The Federal Reserve acts with a lag when it adjusts monetary policy. So, if we react too quickly to a price rise in the short term, it can cause the economy to fall back over the long-term.
MARGARET BENNAN: So you don’t think that the Fed should take steps faster than they do now?
KASHKARI: Right. KASHKARI: Yes. I believe we’ve taken the correct steps. As you all know, we’ve started normalizing our balance sheet quantitative ease. We have now started the taper process. This would likely take six to eight months. That’s the first step towards reducing the monetary stimulus that we provide to the economy. In the next three to six months, or nine months, we’ll have more data from both the demand and supply side to gain a better understanding of where the economy is headed.
MARGARET BRENNAN I want to know what the administration says it is doing. This includes putting in trillions of dollars into these rescue packages. Is it worth the risk, as most economists expect some inflation from it.
KASHKARI : Well, I think Congress as well as the executive branch, under President Trump and President Biden were very aggressive in supporting families through the pandemic. It was the right thing. The recovery is stronger than it was after the 2008 financial crisis. Because the fiscal authorities and monetary authorities were so aggressive, this is partly why the recovery is stronger than it was after the 2008 financial crisis. The question is: What does Congress and the executive do moving forward? Their actions so far have been temporary. Is there a long-term spending program? Are they being paid for? Inflation will be affected by whether or not they are paid.
MARGARET BRENNAN: Right. It’s too early to say that it won’t have an impact. COVID. We were told by Dr. Gottlieb that your state and region are areas where infections are on the rise. Is this a significant factor in the recovery you are seeing right now?
KASHKARI – It will. Right now, we are four to five million jobs and workers below where we would be if there had been a pandemic. Six months ago, when you and I were on your show, we focused on schools that had been closed, the increased unemployment benefits and the fear of the virus. The unemployment benefits have expired, and schools are now largely open. What is the reason people are staying on the sidelines? We believe it’s fear of the virus and the ongoing spread. We need to get this pandemic under control as soon as possible to ensure that people are able to return to work quickly. This will aid in the economic recovery, and it will also help to lower inflation.
MARGARET BRENNAN I know you’ve been examining the impact on women who leave the workforce.
KASHKARI: This is a long-term problem facing our country. We are a far behind other advanced economies when it comes to providing childcare for families. Both of you have young children. We understand the enormous challenges of childcare. We’re both very fortunate to be in a position to afford it. Many families aren’t as fortunate, and this is where luck plays a role. It has an impact on women’s participation and overall labor force participation. These problems have been exacerbated by pandemic. Therefore, I believe long-term this is an important economic growth issue as well as a competitiveness issue.
MARGARET BRENNAN How would the nomination of another top contender like Lael brainard affect policy?
KASHKARI: I think both Governor. Brainard and Powell are both outstanding, highly experienced, and experienced monetary policy makers. If either of them were to be nominated by President Biden, I believe we would be in very capable hands. Both of them were my colleagues. Both of them are outstanding. So, I believe the president has some very smart choices ahead of him.
MARGARET BRENNAN – So, not much of an effect on policy?
KASHKARI : I believe both of them have been instrumental to the new framework that was adopted in terms not shortening the recovery. I’m confident that either one of them would continue to be the chair. That’s my opinion.
MARGARET BRENNAN: Understood. Neel Kashkari – thank you for sharing your insights. We’ll be right back with lots more FACE the NATION. Stay with us.
Source: CBS News