The U.S. economy is making surprisingly good progress, and returning to pre-pandemic levels is “absolutely achievable,” Minneapolis Fed President Neel Kashkari said Sunday, but the job is not yet done.
Speaking on CBS News’ “Face the Nation,” Kashkari said the Fed’s current assessment is that the U.S. will pull off a so-called soft landing and avoid a recession. But he noted that core inflation, currently around 4.1%, is still double the Fed’s 2% target.
“We don’t want to declare victory” yet, he said according to a transcript, adding “if we need to raise rates further from here, we will do so.”
Kashkari left open the possibility of more interest-rate hikes, and stressed that any additional hikes in September or beyond will depend on the circumstances: “We also will continue to watch all the data, the inflation data, the wage data, as well as the unemployment data to make those assessments.”
He touted the surprising resilience of the economy in recovering from pandemic shutdowns and the war in Ukraine.
“Right now, the base-case scenario seems to be that we’ll have a slowing economy, but that we would avoid a recession,” he said. “And I hope that that’s true.”
Kashkari said he doesn’t think it’s realistic to expect no job losses during this inflation cycle, but said that if the unemployment rate rises “from 3.6 to 3.7, 3.8, maybe even 4% — that in my book, that would still be a soft landing.”
“If we can achieve 2% inflation with only a modest softening in the labor market, I think that that would be a resounding positive outcome for the country as a whole,” he said. “We can get back to the kind of economy we had before the pandemic, which was very low unemployment, low inflation, modest, but positive real wage gains for the American people. That is absolutely achievable, but we need to finish the job.”