On Thursday’s broadcast of the Fox News Channel’s “Your World,” Minneapolis Federal Reserve Bank President Neel Kashkari stated that stimulus spending was “a contributor to the high inflation that we’ve seen.” And “the spending on infrastructure, the spending on new chip plants, all of that, on a margin, is inflationary.” Kashkari further stated that while it’s not clear if that spending impacts inflation at the national level, “we are a little bit at cross-purposes” with government spending.
Kashkari said, [relevant remarks begin around 2:35] “Well, the data is going to guide us, we’ve been surprised — in a concerning way — about the first three months’ inflation data this year. The second half of last year, we saw a lot of progress as inflation fell back towards our target. That gave us a lot of optimism that maybe 2% inflation is around the corner. And now, things seem to have stalled out. So, my view is, we just need to sit here and be patient until we see the data and hopefully get convinced that inflation continues to fall back down. The good news is, as you indicated, the economy continues to be strong, GDP growth is strong, consumer spending is strong, and the labor market is strong. So, we’re in a good position from which to take our time before we decide where to go with interest rates.”
Host Neil Cavuto then asked, “Take your time until next year?”
Kashkari responded, “Well, potentially. I dialed in in March, I had dialed in two interest rate cuts this year, two 25-basis-point cuts. That was before some of the data that we’ve seen. I’m in the view of we need to wait and see, be patient, as long as it takes, until we get convinced that inflation is on its way back down to 2%. We don’t have to make that decision until June. So, I’m going to hold off making that decision.”
Cavuto then asked, “Neel, how much does all of this spending in Washington complicate things? Because that is, in itself, inflationary, not exclusively, but it doesn’t help your cause, does it?”
Kashkari answered, “It complicates things. We know that a lot of stimulus was part of the driver, not the only driver, but a contributor to the high inflation that we’ve seen. When I go out and I look at, where is investment taking place, where is construction taking place, we know, for example, the spending on infrastructure, the spending on new chip plants, all of that, on a margin, is inflationary. Is it big enough to move inflation at the national economy level? That’s a little bit unclear. But — so, we are a little bit at cross-purposes, where you have some programs that are really well-meaning, and, for good reason, the Congress is focused on. In the meantime, we’re trying to get demand down in the economy. So, there are some complications that we’re having to navigate right now.”
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