ibankcoin.com / Dr. Fly / Jun 18, 2017
Serious question, how long until Neel is out at the Fed? Clearly, he’s an independent thinker, espousing views that are very popular on Wall Street. His outward resistance against the Yellen hegemony is both entertaining and refreshing. However, I am skeptical he’ll be able to keep it up without suffering heinous consequences.
In an essay published on Friday, Fed’s Kashkari explained why he dissented against another rate hike, basically calling Yellen a pavement ape thinker.
He categorized the Fed’s decision to raise rates as being ‘faith’ based, saying, “For me, deciding whether to raise rates or hold steady came down to a tension between faith and data. On one hand, intuitively, I am inclined to believe in the logic of the Phillips curve: A tight labor market should lead to competition for workers, which should lead to higher wages. Eventually, firms will have to pass some of those costs on to their customers, which should lead to higher inflation. That makes intuitive sense. That’s the faith part.”
Kashkari added, “Unfortunately, the data aren’t supporting this story, with the FOMC coming up short on its inflation target for many years in a row, and now with core inflation actually falling even as the labor market is tightening. If we base our outlook for inflation on these actual data, we shouldn’t have raised rates this week. Instead, we should have waited to see if the recent drop in inflation is transitory to ensure that we are fulfilling our inflation mandate.”