Fed's Kashkari Predicts Fed Hikes To 5.4% And Pauses• https://www.zerohedge.com, by Tyler Durden
When it comes to the Fed's resident Wall Street liaison (with prior stints at Goldman - where he laid out the framework of the Fed's original bailout - and Pimco where he did who knows what) and exemplary failer-upper, Neel Kashkari, market participants are used to broadly ignoring the Minneapolis Fed president's insights into monetary policy (not only does he not understand it, but he has been wrong about pretty much everything during his relatively brief Fed career) if only to listen to him for perspective on what will not happen. Which is why in an essay just published by the 2023 FOMC voter in Medium (where he has 3,000 followers) is informative if only for one thing: it confirms that whatever happens, the Fed will not raise rates as high as 5.4%, because that's what Kashkari thinks will happen, in the Fed's crusade to contain the worst inflation since 1980 - the same inflation the Fed's helicopter money in 2020 and 2021 made possible in the first place.
"It will be appropriate to continue to raise rates at least at the next few meetings until we are confident inflation has peaked," Kashkari said adding that he sees the Fed "pausing at 5.4%, but wherever that end point is, we won't immediately know if it is high enough to bring inflation back down to 2% in a reasonable period of time." And for the definitive argument why the Fed may have already hiked its last, here is Kashkari's deep insight: "Any sign of slow progress that keeps inflation elevated for longer will warrant, in my view, taking the policy rate potentially much higher."
This comes from the same forecasting genius who was kind enough to reveal that one year ago, he expected Fed Funds to be at 1% in 2023, a number which he has since raised to 5.4%. Or off by more than 80%.
But trust him this time, he will be right.
Kashkari, who is a voting member on the FOMC this year, unexpectedly emerged in 2022 as one of the Fed's biggest hawks after spending several years before the pandemic as its biggest dove, enabling the Fed's $9 trillion balance sheet and much of the galloping inflation observed around the world today. According to Bloomberg, his 5.4% projection suggests he may be moving a bit closer to the center of the committee, given that two officials in December projected it would be appropriate to raise the federal funds rate even higher this year.