Neel Kashkari, Minneapolis Federal Reserve
Brendan McDermid | Reuters
If you’re debating whether or not the U.S. is in a recession, you’re asking the wrong question, according to a senior Federal Reserve official.
“Whether we’re technically in a recession or not doesn’t change my analysis,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CBS’ “Face the Nation” on Sunday. “I’m focused on the inflation data. I’m focused on the wage data. And so far, inflation continues to surprise us on the upside. Wages continue to grow.”
Last month, US inflation jumped to a four-decade high, rising 9.1% from a year ago. At the same time, the labor market remained strong: Nonfarm payrolls rose by 372,000 last month, along with a low national unemployment rate of 3.6 percent.
On Thursday, new data from the Labor Department showed signs of a labor market pullback, with initial jobless claims reaching their highest level since mid-November. Still, Kashkari said, the job market is “very, very strong.”
“Typically, recessions show high job losses, high unemployment, that’s terrible for American families. And we’re not seeing any of that,” he said.
The problem, Kashkari said, is that even in a strong labor market, inflation outpaces wage growth, giving many Americans a functional “pay cut” as living costs rise across the country. . Solving this problem by reducing inflation is the Federal Reserve’s primary goal right now, he added.
“Whether we’re technically in a recession or not, it doesn’t change the fact that the Federal Reserve has its own work to do, and we’re committed to doing it,” Kashkari said.
The Bureau of Economic Analysis reported Thursday that the nation’s gross domestic product shrank for the second straight quarter, often a warning sign that accompanies economic downturns. For Kashkari, that may actually be a good thing: An economic slowdown could help reduce inflation to the point where it no longer outpaces wage growth.
“We definitely want to see some slowdown [of economic growth]”, he said. “We don’t want to see the economy overheated. We’d love it if we could make the transition to a sustainable economy without tipping the economy into recession.”
Doing so poses a significant challenge for the Fed. Kashkari acknowledged that economic slowdowns tend to be very difficult to control, “especially if it’s the central bank that’s causing the slowdown.”
Still, he said, the bank will do whatever is necessary to control inflation.
“We will do everything we can to avoid a recession, but we are committed to reducing inflation and we will do what we have to do,” Kashkari said. “We’re a long way from getting an economy back to 2% inflation. And that’s where we need to get.”
[ad_2]
Source link
