Neel Kashkari, Essay: Update on Inflation and Monetary Policy

“If my first explanation of the enduring high inflation noted above is right (that it will still prove transitory but take much longer than expected), then I believe the FOMC will need to remove accommodation and get modestly above neutral while the inflationary dynamics unwind. However, if my second explanation noted above is right (that the economy is in a high-pressure, high-inflation equilibrium), then the FOMC will need to act more aggressively and bring policy to a contractionary stance in order to move the economy back to an equilibrium consistent with our 2 percent inflation target. Over the course of this year, while we are moving to what I expect will be a neutral policy stance, we will get information to help us determine how much further we may need to go.”