Fed’s Kashkari: There is little reason to raise rates further

In a recently published blog post, Minneapolis Fed President Neel Kashkari argued that there was little reason to raise rates further. Below are some key takeaways from the article.

• We know the bond market is telling us that inflation expectations appear well-anchored, the economy is not showing signs of overheating and rates are already close to neutral.
  • This suggests that there is little reason to raise rates much further, invert the yield curve, put the brakes on the economy and risk that it does, in fact, trigger a recession.
• If inflation expectations or real growth prospects pick up, the Fed can always raise rates then.
• If the Fed continues raising rates, we risk not only inverting the yield curve, but also moving to a contractionary policy stance and putting the brakes on the economy, which the markets are indicating is at this point unnecessary.