Kashkari Says Declining To Raise Interest Rates Was The ‘Right Move’

September 27, 2016, 5:26 PM UTC
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, speaks during a Bloomberg Television interview in New York, U.S., on Wednesday, Feb. 17, 2016.
Photograph by Chris Goodney—Bloomberg via Getty Images

The Federal Reserve made the “right move” in deciding last week to leave interest rates unchanged, a top Fed official said on Monday, because inflation remains low and more workers are returning to the labor force.

“That to me suggests we have time before we need to adjust rates,” Minneapolis Fed President Neel Kashkari told reporters after a symposium on banking regulation at his bank’s headquarters.

Fed policymakers voted 7-3 on Sept 21 to hold steady the target rate for overnight lending between banks at 0.25% to 0.5%. Kashkari currently participates in Fed policy discussions as a non-voter, but rotates next year into a voting role.

“I do think that was the right move. I supported the decision in the meeting,” Kashkari said. “It seems to me that the risks of too low inflation are greater than the risks of too high inflation.”


Unemployment registered 4.9% in August, below what many economists view as sustainable in the long run, and most Fed officials expect it to fall further.

Inflation has run well below the Fed’s 2% target for four years.

Kashkari said he does not consider himself either a monetary policy dove with a preference for lower rates or a hawk who leans toward higher rates.

Instead, he said, he watches inflation, inflation expectations, and the unemployment rate for clues on the optimal setting for interest rates.

“If the data changes and inflation moves up, or inflation expectations move up, or we see either the headline unemployment rate drop quickly or we have some confidence that the slack in the labor market has been used up, that would then suggest to me, okay now it’s time to get going,” Kashkari said. “Then I might be aligned with the hawks.”

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