Fed Is ‘Far, Far Away’ From Declaring Win on Inflation Despite White House Victory Lap: Kashkari

The president of the Federal Reserve Bank of Minneapolis has said that the Central Bank is “far, far away from declaring victory” on inflation, despite the Biden administration praising “zero percent” inflation in July, which prompted some confusion.

Neel Kashkari told Reuters on Aug. 10 that he believes the U.S. central bank will need to raise its policy rate another 1.5 percentage points in 2022 and more in 2023, even if doing so prompts an economic downturn in the “near future,” noting that “We have to get back to 2 percent inflation.”

The Fed’s policy rate will need to be raised to 3.9 percent by the end of the year and to 4.4 percent by the end of 2023 to fend off inflation, Kashkari said, adding that he hasn’t “seen anything that changes” this outlook. The rate is currently in the 2.25 percent to 2.5 percent range.

The Fed is “far, far away from declaring victory” on inflation, Kashkari noted, although he welcomed July’s consumer price index (CPI) report, which showed the U.S. annual inflation declined in July from 9.1 percent in June.

According to the Bureau of Labor Statistics, the Consumer Price Index showed that inflation was at 8.5 percent in July 2022. Experts had predicted a reading of 8.7 percent.

Meanwhile, the core inflation rate, which excludes the volatile food and energy sectors, remained unchanged at 5.9 percent last month and reported a smaller monthly increase of 0.3 percent compared with June.

The data prompted President Joe Biden to declare that the U.S. economy had “zero percent” inflation in July, which sparked controversy, particularly among experts and Republican lawmakers.

‘Zero Inflation’

“Before I begin today, I want to say a word about the news that came out today relative to the economy. Actually, I just want to say a number: Zero,” Biden said during an address from the White House on Wednesday.

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