Minneapolis Fed president and CEO on interest rates and Kevin Warsh’s nomination
(CBS, KYMA) - Neel Kashkari, President & CEO Minneapolis Fed, spoke with Margaret Brennan on Face the Nation Sunday about interest rates.
According to Brennan, the Federal Reserve kept interest rates unchanged this past week, but on Wednesday, Kashkari was one of three regional presidents who indicated future rate cuts may not be appropriate and a hike could be in the cards.
This prompted Brennan to ask if Kashkari is saying the financial markets and the White House should no longer expect the Fed to cut rates, to which he said:
"I think we all need to be open-minded about where interest rates are going, because there's so much uncertainty coming out of the Middle East. You know, I think I'm very focused, and many of my colleagues are, what happens in Iran, how long the Strait of Hormuz is closed, and the longer it's closed, the higher likely energy prices and fertilizer prices will go, the bigger impact it's going to have on inflation here in America, and then we at the Fed have to take that on board. And so, I was simply saying that there's so much uncertainty about the outlook in the Middle East right now, I don't feel comfortable signaling that a rate cut is in the cards. You know, in worse scenarios, we might have to go the other direction."
After bringing up her previous interview with National Economic Council Director Kevin Hassett, who Brennan said painted "a picture of continued tension" in the Middle East, she asked Kashkari how he is going to be able to judge the inflation shock over the next few weeks until the meeting in June, and he said:
"I'll give you an example. So, the price effect, the energy effect and energy prices from the Iran conflict is already, by some measures, as big or larger than when Russia invaded Ukraine. So, it's already having a big effect and we're seeing it...you mentioned the PCE data, we're already seeing it in the inflation numbers here at home. I talked to the CEO of a global company headquartered in Minnesota that has supply chains all around the world just last week, and they have estimated that even if the strait reopened today, it would probably take six months for their supply chains to return to something like normal. So I think for the Fed, we are going to have to watch what happens in the Middle East and the inflation data very carefully. That's going to have to guide us. But if it's a six-month process for inflation returning to normal, or something like normal, in the best-case scenario, I'm also very concerned about something that's not the best-case scenario, and what that might do to prices here at home."
During the interview, Brennan and Kashkari talked about Kevin Warsh's nomination as chair of the Federal Reserve.
Brennan said the Senate Banking Committee voted to advance his nomination, and is expected to be confirmed in mid-May.
During his testimony, Warsh said the Federal Reserve "mishandled inflation over the past few years," and said the Fed needs a "serious shaking up with a 'good family fight.'"
When asked if he agrees with Warsh's comment, Kashkari said:
"I think we're all looking forward to Kevin concluding his confirmation process, and we look forward to working with him and hearing his ideas. Some of the things that he's talked about, I think we would welcome an examination of, how we communicate, this thing that we call the dot plot he's talked about. I think many of us would like to examine that. There are things about the balance sheet and how we use the balance sheet. I think those are also...I think we would welcome a fresh examination of some of these policies. And so I think someone coming in and saying, hey, let's reexamine how we use some of our tools, I think those are good discussions to have. I don't think we'd be physically fighting I think that we'd have robust discussions over the benefits and the cost of these various tools, and I think that that would be worthwhile to have."
To watch more of Brennan's interview with Kashkari, click here.
