Neel Kashkari, Interview: Q&A at the Boston Economic Club

Fed Funds

“There’s the transition period that we’re going through right now, which is where most of my colleagues, I think, have said they expect the federal funds rate to get above 5% at some point this year. Could it go higher than that? Certainly possible, it could go higher than that. We will all respond to the data that we see in the inflation. Then the expectation is at some point, we will end up holding rates, pausing for some period of time, probably a long period of time, while that tighten policy works its way through the economy, and then assess, do we need to go higher from there or do we need to go lower from there. It’s going to be determined by how quickly inflation starts falling back towards our target.”

Recession

“Yeah. This is another example of the mixed signals that we’re getting from the economy. Typically, economists will say, “Well, if you have two quarters in a row of negative GDP growth, that typically signals a recession.” But typically, in a recession, you have a lot of job losses. In those first six months of the year, you had very, very strong job growth. That’s why many of us said, “It doesn’t look like we’re really in a recession.”

“I don’t have a great answer. There were some measurement issues between gross domestic product and gross domestic income. Those two are supposed to be the same. They had big deviations during that period, and then they reverted back towards each other over time. We’re expecting, as policy is tight, tighter, the economy will grow much more slowly this year over the course of this year than last. Most forecasts, I think, are for us to avoid a recession, but I think it’s going to depend on some of the dynamics that we’ve been talking about here today. I don’t have a good answer for you, sir. It’s a lot of mixed signals coming out of the economy and the reopening.”