Rep. Kevin Brady discusses in Fox Business Tonight how Biden still denies the US has entered a recession.
Federal Reserve Bank of Minneapolis CEO and President Neel Kashkari said Sunday that the current state of inflation is “very concerning” and “is spreading more broadly across the economy.”
“It’s very worrying. We keep getting inflation readings, new data that just came in last week, and we keep getting surprised. It’s higher than we expected,” Kashkari said during an appearance on CBS’s “Face The Nation.” “And it’s not just a few categories. It’s spreading more and more broadly across the economy, and that’s why the Federal Reserve is acting with such urgency to bring it under control and bring it back down.”
Kashkari stressed that while wages are rising for many Americans, so are the costs of goods and services, meaning workers are taking a “real wage hit” because inflation is growing so rapidly. He said there was no wage-driven inflation and the cost of goods was partly due to disruptions in the supply chain caused by the pandemic and now the war in Ukraine.
“For most Americans, wages are rising, but they’re not rising as fast as inflation, so real wages and real incomes for most Americans are falling,” he said. “They get a cut in real wages because inflation is growing so fast. I mean, what we normally think of is wage-driven inflation, where wages are rising rapidly and that leads to higher prices in a self-fulfilling spiral – it’s not happening yet. High prices and wages are now trying to catch up with those high prices. These high prices are now being driven by supply chains and the war in Ukraine, among other things. So we need to rebalance the economy before that really happens from a very wage-driven inflationary history.”
POWELL ASSURES THAT THE FED HAS A HEAVY FOCUS ON FIGHTING INFLATION
Minneapolis Federal Reserve Chairman Neel Kashkari attends “Maria Bartiromos Wall Street” on March 29, 2019 at Fox Business Network Studios in New York. (John Lamparski/Getty Images/Getty Images)
Referring to the latest Economic Cost Index results, he stressed that it’s good that Americans are earning more, but the Federal Reserve can’t wait for the supply chain to adjust to lower prices.
“Inflation only exists at its base level, when demand exceeds supply. We know supply is low due to supply chains, the war in Ukraine and COVID. We had hoped that the offer would go online sooner. That’s not what happened,” Kashkari said. “So we need to balance demand. Now I’m hoping we can get some supply-side help, but that doesn’t change the fact that the Federal Reserve is doing its job has fulfilled and we have committed to it.”
“We cannot wait for supply to fully recover. We have to do our bit on monetary policy,” he added.
Kashkari argued that the new bill by Sens. Chuck Schumer, DN.Y., and Joe Manchin, DW. Va., dubbed the Inflation Reduction Act, “won’t have much of an impact on inflation” for the next few years, and it will be up to the Federal Reserve to adjust monetary policy to bring it down.
Moderator Brian Cheung and banker Neel Kashkari attend the Yahoo Finance All Markets Summit at Union West Events on October 10, 2019 in New York City. (Jim Spellman/Getty Images/Getty Images)
“In the short term, the demand side effects have completely overwhelmed the supply side effects. So when I look at a bill that’s being considered that your two senators have been talking about, I’m assuming it won’t have a big impact on inflation for the next few years,” he said. ” It’s not going to affect how I analyze inflation over the next few years, I think in the long term it might have some impact, but in the short term we have an acute supply/demand mismatch and it’s really up to the Federal Reserve to do that do be able to lower that demand.”
The White House has repeatedly refrained from acknowledging that the US economy is in recession and has debated the definition of the term. On Sunday, Kashkari argued that inflation is so bad it doesn’t matter whether we use the term recession or not and serious work needs to be done to address it.
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“Basically, the labor market appears to be very strong, while the GDP that the economy is producing appears to be shrinking. So we’re getting mixed signals from the economy. From my perspective, when it comes to keeping inflation in check, whether we’re technically in a recession or not doesn’t change my analysis,” he said. “I’m focused on the inflation data. I’m concentrating on the payroll data. And so far, inflation continues to surprise us on the upside. Wages continue to rise. So far the job market is very, very strong. And that means whether we’re technically in a recession or not doesn’t change the fact that the Federal Reserve has its own job to do.”
“We are a long way from reaching an economy that is back to 2% inflation. And that’s where we need to get to,” added Kashkari.