The lone Federal Reserve official to vote against the central bank’s decision Wednesday to raise interest rates explained his dissent Friday, arguing that inflation and employment are still too low.
Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, wrote that “we are still coming up short on our inflation target,” and that the ongoing job growth shows that there are still gains to be made before monetary policy is tightened.
Kashkari laid out his dissent in a post on the publishing platform Medium, an unusual venue for a Fed official.
He indicated that he does not agree with concerns that the Fed is in danger of “falling behind the curve” and sparking too-high inflation if it doesn’t raise rates more quickly.
In particular, he drew attention to the fact that core inflation has been running below the Fed’s 2 percent target since the spring of 2012, and that core inflation, now at 1.7 percent, suggests that the target still might not be reached.
The Fed, he said, should be overshooting its inflation target as often as it undershoots it. “We keep predicting that inflation is around the corner,” he wrote.
While other Fed officials have claimed that the U.S. is near “full employment,” with unemployment at 4.7 percent, Kashkari claimed that it probably is not, and too many people are still missing jobs. His evidence? That the working-age employment ratio, at 78.3 percent in February, still is well below its pre-crisis average.
Low working-age employment suggests that there are many people on the sidelines who would like to be working. That the unemployment rate keeps falling without driving up inflation, Kashkari suggested, means that there’s more unemployment and underemployment than the most commonly-cited numbers indicate.
