Minneaopolis Fed chief Neel Kashkari spoke today on US monetary policy and inflation prospects. The tone of the speech was hawkish, index futures lose - the dollar gains. Here's what we could learn from Kashkari today:
- A rise in interest rates will cause losses in the global economy and a period of setbacks, not a surprise for the Fed. Still little evidence of an inflationary peak in the US;
- The risk of an overly aggressive hike cycle exists and is possible. The economy continues to send mixed signals;
- Kashkari noted that 'the bar for a Fed rate change is very high' meaning that for the pivot to materialize the Federal Reserve would have to see a massive deterioration in readings;
- A transitional period of weaker growth for the U.S. economy, according to Kashkari, would last another year to two years. In addition, the bill to lower inflation in the U.S. is unlikely to have a significant impact on it for the next two years;
- More needs to be done on inflation, however, Kashkari is not worried about stagflation. The Fed needs to focus on further balance sheet reduction;
- Soft landing possible if supply-side assistance arrives (including improving supply chains);
- Kaskhari believes the U.S. economy is 'resilient' due to lower household debt, and bank capital reserves higher than before the 2009-2009 crisis;
- The strong dollar correctly reflects the prospects for further rate hikes;
- Kashkari is negative on the concept of a blockchain-based digital currency known as CBDC, although he indicated that he remains 'open-minded.
US500 chart, M15 interval. The index loses after Kashkari's comments and dives below the SMA200 on the 15-minute interval. Source: xStation5
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