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FILE PHOTO: Minneapolis Federal Reserve Bank President Neel Kashkari poses during an interview with Reuters in his office at the bank’s headquarters in Minneapolis, Minnesota, U.S., January 10, 2020. REUTERS/ Ann Saphir

President of the Federal Reserve Bank of Minneapolis Neel Kashkari said Democrats are responsible for economic problems facing the US. In an interview Sunday, Kashkari pointed out that Biden’s officials falsely denied that inflation would get out of hand and now they are trying to change the definition of a recession.

“People don’t wait to hear from the media that they’re in a recession,” said Kashkari. “Most peoples pay checks are not going as far as it used to and that is true.


The Federal Reserve Bank of Minneapolis president warned Sunday that the current rate of inflation is troubling and will spread across the country.

“It’s very concerning. We keep getting inflation readings, new data that comes in as recently as this past week, and we keep getting surprised. It’s higher than we expect,” Fed branch President Neel Kashkari said on CBS News’ “Face The Nation.” “And it’s not just a few categories.
It’s spreading out more broadly across the economy and that’s why the Federal Reserve is acting with such urgency to get it under control and bring it back down.”

He said that wages are increasing for many Americans.

And so we need to get the economy back into balance before this really does become from a very wage drive inflation story.”

POWELL PLEDGES THE FED IS ‘ACUTELY FOCUSED’ ON TACKLING INFLATION

Minneapolis Federal Reserve President Neel Kashkari visits “Maria Bartiromo’s Wall Street” at Fox Business Network Studios on March 29, 2019, in New York. (John Lamparski/Getty Images / Getty Images)

Noting the recent results of the economic cost index, he stressed that it’s a good thing Americans are earning more, but the Federal Reserve cannot wait for the supply chain to adjust to get prices down.

“Just at its basic level, inflation is when demand is outstripping supply. We know supply is low because of supply chains, because of the war in Ukraine, because of COVID. We hoped that supply would come online more quickly.
That hasn’t happened,” Kashkari said.

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“Fundamentally, the labor market appears to be very strong while GDP, that the amount the economy is producing appears to be shrinking. So, we’re getting mixed signals out of the economy. From my perspective, in terms of getting inflation in check, whether we are technically in a recession or not doesn’t change my analysis,” he said. “I’m focused on the inflation data. I’m focused on the wage data. And so far, inflation continues to surprise us to the upside.

Wages continue to grow. So far, the labor market is very, very strong. And that means whether we are technically in a recession or not doesn’t change the fact that the Federal Reserve has its own work to do.”

“We are a long way away from achieving an economy that is back at 2% inflation. And that’s where we need to get to,” Kashkari added.


He said wage-driven inflation is not happening, and the cost of goods is partially due to disruptions in the supply chain, namely caused by the pandemic and now the war in Ukraine.

“For most Americans, their wages are going up, but they’re not going up as fast as inflation, so most Americans’ real wages, real incomes are going down,” he said. “They’re getting a real wage cut because inflation is growing so quickly. I mean typically, we think about wage-driven inflation where wages grow quickly and that leads to higher prices in a self-fulfilling spiral – that is not yet happening. High prices and wages are now trying to catch up to those high prices.
Those high prices are now being driven by supply chains and the war in Ukraine among other factors.


They’re going to think this is a recession, they’re going to think this is a bad economy and they’re hold the party in power accountable. This administration I think has consistently played politics of the economy badly.”

“We would love it if we can transition to a sustainable economy without tipping the economy into recession. There’s not a great record of doing that.”

Neel Kashkari, Minneapolis Fed Bank president, said we are “a long way away” from an economy that is back at 2% inflation.
pic.twitter.com/F8Mb7Bm6Ke

— Face The Nation (@FaceTheNation) August 1, 2022

The central banker said administration officials should not have done that and they should have admitted responsibility instead.

And so, when I look at a bill that’s being considered that your two senators talked about, my guess is over the next couple of years, it’s not going to have much of an impact on inflation,” he said. “It’s not going to affect how I analyze inflation over the next few years. I think long term it may have some effect, but over the near term we have an acute mismatch between demand and supply, and it’s really up to the Federal Reserve to be able to bring that demand down.”

The White House has repeatedly held back from admitting the U.S. economy is in a recession and has been debating the definition of the term. On Sunday, Kashkari argued that inflation is so bad that it doesn’t matter if we use the term recession or not, and seriously work needs to be done to address it.

I mean typically, we think about wage-driven inflation where wages grow quickly and that leads to higher prices in a self-fulfilling spiral–that is not yet happening,” he added.

“High prices and wages are now trying to catch up to those high prices … and so we need to get the economy back into balance before this really does become from a very wage-driven inflation story,” the Fed president added.

Cause

Some Republicans and economists have said that multi-trillion-dollar federal government spending packages around COVID-19 have triggered high inflation, while some have blamed it on COVID-19-related shutdowns of supply chains that haven’t fully rebounded.

Without making mention of government spending, Kashkari blamed the price surge on the war in Ukraine and COVID-19.

However, so are the cost of goods and services, adding that workers will suffer a “real wage cut” due to price pressures.

Earlier this month, the Bureau of Labor Statistics released its Consumer Price Index data, showing a key metric for inflation rose 9.1 percent year-over-year in June, or the highest figure seen since the early 1980s. Another metric, the Producer Price Index, shot up by 11.3 percent in June, which is also the highest in decades.

Wages are “not going up as fast as inflation, so most Americans’ real wages, real incomes are going down,” Kashkari told the outlet Sunday.

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, warned Sunday the inflation crisis does not appear to be slowing down anytime soon.

Inflation hit 9.1% last month, a figure not seen in more than 40 years.

What did Kashkari say?

Speaking on CBS News’ “Face The Nation,” Kashkari revealed that economists are repeatedly surprised at new data that shows an alarming inflationary trajectory.

“We keep getting inflation readings — new data that comes in, and as recently as this past week — and we keep getting surprised. It’s higher than we expect,” Kashkari explained.

“And it’s not just a few categories — it’s spreading out more broadly across the economy,” he asserted.

The significant problem with inflation, Kashkari said, is the purchasing power of every dollar is decreasing.

He didn’t elaborate.

“Just at its basic level, inflation is when demand is outstripping supply. We know supply is low because of supply chains, because of the war in Ukraine, because of COVID. We hoped that supply would come online more quickly.

That hasn’t happened,” Kashkari said. “So, we have to get demand down in the balance. Now, I hope we get some help on the supply side, but that doesn’t change the fact that the Federal Reserve has its job to do, and we are committed to doing it.”

A new bill proposed by Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer (D-N.Y.) that claims to reduce inflation won’t do much, he argued.

Instead, the Federal Reserve’s monetary policies are what will drive it down, he said.

Last week, Fed officials again raised interest rates by 75 basis points.

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