Neel Kashkari, Interview: Montana State University, Town Hall

Monetary policy was not discussed, although the Economy was covered. —

2.0% Inflation Target

“So we don’t realize it ends up woven into the fabric of our everyday decision making. If we all of a sudden change it and say, well, inflation’s really high right now, it’s around 5%, so let’s just stop at three and a half and call it good. All of a sudden people are like, wait a second. They told me two. Now you’re going to stop at three and a half? Well, maybe next time you’re going to stop at four and then you’re going to stop at five. And then maybe I just don’t believe anything you’re saying to me. And so there’s a reasonable argument one could make in the long term, should it be two, should it be two and a half or something different? We could have that debate, but there’s no way we can adjust this when we’re missing our target right now because we would do enormous harm to the credibility of the institution.”

Inflation

“I would see us getting somewhere in the middle threes, I hope by the end of this year, but on a nice solid path back down to 2% sometime hopefully over the course of the following year. But I don’t know yet. And there’s a lot of uncertainty.”

Recession

“We need to get inflation down and we have to get inflation back down to our 2% target because if we were to fail to do that, then your job prospects would be really harmed. You’re right. It could be that our monetary policy actions and the tightening of credit conditions because of this banking stress leads to an economic downturn. That might even lead to a recession. It’s possible that that would lead to recession, and that would probably make your job search a little bit harder if you’re searching for a job in a recessionary period. As hard as that, that would be, and I’m not hoping for that, but as hard as that would be, it would be unambiguously worse if we failed to get inflation back down and people lose confidence that the Federal Reserve is going to do its job.”