Fed’s Kashkari says ‘now is the time to start slowly moving’ rates up

Minneapolis Federal Reserve President Neel Kashkari said Wednesday that he thinks higher interest rates are needed now to bring down inflation and avoid more drastic increases later.

In a CNBC interview, the central bank official called for a gradual approach that could start in September, though he did not commit to a timetable.

Kashkari was one of three dissenters at last week’s Federal Open Market Committee who wanted a quarter percentage point rate hike. However, the other nine voters disagreed, voting to hold the benchmark funds rate in a range between 3.5%-3.75%.

“Corporate earnings are through the roof. They’re doing great. The consumer is hanging in there. The labor market is hanging in there. I look at this constellation and I say, what evidence do I have that monetary policy is particularly restrictive right now?” he told CNBS’s Andrew Ross Sorkin in a live interview from the Aspen Ideas Festival in Colorado.

“So, I argued now is the time to start slowly moving up as we get more data in,” he said.

The FOMC has been on hold all year as officials deliberate over the proper approach to policy with the labor market stabilizing but inflation holding well above the Fed’s 2% target.

Inflation data in June showed some improvement as tensions temporarily eased in the Middle East and oil prices pulled back.

However, Kashkari said he remains uneasy about the situation and thinks the Fed needs to address what he called a series of supply shocks pressuring consumers. He added that he’s not sure what the committee will do at its Sept. 15-16 meeting and said coming data points will be key.

“I’m not calling for a dramatic increase in interest rates,” he said. “I’m simply saying I don’t see evidence of monetary policy is marginally restrictive right now, and I think we have more work to do to get inflation back down. And I would rather get going now in small steps than wait till later, then we have a really entrenched inflation problem and have to raise rates aggressively then.”

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