Fed's Kashkari Gains Company in Concerns Over Raising Rates
By Michael S. Derby
Neel Kashkari labored through much of this year as the most prominent Federal Reserve official opposed to raising short-term interest rates. Lately, he's gained more company.
Mr. Kashkari, president of the Minneapolis Fed, has argued the central bank shouldn't be raising borrowing costs when inflation persists below its 2% target. He cast the only votes against the Fed's rate increases in March and June.
Fed officials in June penciled in one more rate rise this year, with most sharing Chairwoman Janet Yellen's view that inflation would likely pick up amid a tightening labor market. Since then, however, a string of largely disappointing price readings have given officials doubts about whether they'll be in a position to raise rates again later this year. Several now say they want to see more evidence of strengthening inflation before they'll support another rate move.
Mr. Kashkari "has proven himself with a fairly prescient view on the economy that is hard to ignore" given inflation's performance, said Tim Duy, an economics professor at the University of Oregon.
Shawn Sebastian, an activist with the left-leaning group Fed Up, commended Mr. Kashkari for pushing back against higher rates. "He is the one making an argument that reflects real-world data," he said.
The Fed is likely to leave rates unchanged at their meeting this week, and officials' new projections to be released Wednesday will show how many still expect to lift rates again before year's end.
A few other Fed officials voiced concerns similar to Mr. Kashkari's earlier in the year but either voted to raise rates or don't hold voting seats on the central bank's rate-setting committee in 2017, due to its annual rotation system. His votes turned him into the Fed's most public dissident, drawing an unusual degree of attention for a relatively new central banker.
Mr. Kashkari has been less lonely lately. Leaders of the Chicago, Dallas and Philadelphia Fed banks have said recently they want to see higher inflation before approving another rate rise. Fed governor Lael Brainard said recently " we should be cautious about tightening policy further until we are confident inflation is on track to achieve our target."