Neel Kashkari, Interview: Q&A at Wharton Club of Minnesota alumni event in Minneapolis

“When we raise interest rates, the first thing we think is going to happen is the housing is going to be affected. So the sectors that we would expect to see affected by our tightening monetary policy are in fact slowing down. And the question now is how long before inflation comes down, how much more are we going to have to do? And I’m sure we’re going to get into that in our Q&A.” 

“By raising interest rates, we can bring demand down. Raising interest rates does not help bring more supply online. So we’re trying to bring these two things into balance. And the more help we can get from the supply side, the less we have to do, the better for the economy in terms of avoiding a hard landing.” 

“So some things happen right away. Other things take more time to work their way into the economy. I would tell you, just speaking for myself, if inflation was high right now, and 4% when we want it to be 2%, I would be more willing to say, “You know what? Let’s take our time, and let’s gradually bring it back down and avoid the risk of overdoing it.” But when inflation is 8% or 9%, we run the risk of un-anchoring inflation expectations and leading to very bad outcomes that would cause us to have to be very aggressive, Volckeresque to then re-anchor them. We definitely want to avoid allowing that situation to develop.”