Fed’s Bostic, Kashkari call for higher rates after ‘concerning’ inflation, jobs data

Two Federal Reserve officials speaking Wednesday said more aggressive interest rate hikes are necessary to slow inflation, as is the central bank keeping rates at elevated levels for some time.

Minneapolis Fed President Neel Kashkari said Wednesday he is remaining “open-minded” about whether the Fed should raise rates by 25 or 50 basis points at its next policy meeting on March 21-22.

“I’m open-minded about whether it’s 25 or 50 basis points [next meeting],” Kashkari said during a Q&A at a Sioux Falls Business CEO event. “What’s more important is what we signal in the dot plot.”

Kashkari said in December, he jotted down raising interest rates up to 5.4% and holding rates at that level for an extended period. “At this point I haven’t decided what my dot is, but I would lean towards continuing to push up my rate and policy path,” he said.

“Given the data in the last month — the inflation report and strong jobs report — these are concerning data points suggesting we’re not making progress as fast as we’d like,” Kashakri said. “At the same time we don’t want to overreact.”

Kashkari is a voting member of the FOMC, the Fed committee that sets monetary policy, in 2023.

Elsewhere, Atlanta Fed President Raphael Bostic said Wednesday he believes the Fed needs to raise its policy rate by 50 basis points, to a range of 5%-5.25%, and hold it at that level until well into 2024.

“We must determine when inflation is irrevocably moving lower,” Bostic wrote in an essay. “We’re not there yet. That’s why I think we need to raise the federal funds rate to between 5-5.25% and leave it there well into 2024. This will allow tighter policy to filter through the economy and ultimately bring aggregate supply and aggregate demand into better balance and thus lower inflation.”

Bostic is not a voting member of the FOMC in 2023, but will be a voting member in 2024.

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Bostic said in order to consider reversing the course of monetary policy, he needs to see a better balance in the job market between labor supply and demand and see broad-based inflation narrow. Bostic noted about half of the goods in the CPI market basket still show inflation rates of 6 percent or higher

“If we are going to get inflation back in the range of our target, the breadth of inflation will have to narrow considerably,” Bostic wrote. “When inflation is no longer top of mind, our mission will largely be accomplished. We are clearly not there yet. But I—and the Committee—are committed to doing all we can to ensure that we get there as soon as possible.”

This story is breaking news and will be updated.

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