Fed's Kashkari supports another rate hike this year

By Ovunc Kutlu

ISTANBUL (AA) - Minneapolis Fed President Neel Kashkari said he could support another rate hike of 25 basis points at the US central bank’s remaining two meetings this year.

"One of the big surprises for all of us was we've raised interest rates by 5.25%. Given out how quickly we did it, I would've thought that would have slammed the brakes on the economy that consumers would be pulling back and the labor market weakening with that aggressive tightening cycle," Kashkari said in a Q&A session hosted by the University of Pennsylvania’s Wharton School of Business late Monday.

"What's happened? The labor market remained very strong. Unemployment rate ticked up barely,” he said. “And consumers have remained very strong. We are surprised about how much consumers are spending, and GDP growth has remained strong.”

The Fed revised its 2023 growth forecast for the American economy to 2.1% last week. That is up from a June estimate of 1%, for which Kashkari said is "a huge revision" before adding: "The economy has continued to exceed expectations in its underlying resilience."

"So if the economy is fundamentally much stronger than we've realized, the rates would probably have to go a little bit higher and then held higher for longer to cool things off," he said.

The Fed last week skipped an interest rate hike for the second time this year, keeping the federal funds rate unchanged between the 5.25%-5.5% target range, the highest in 22 years.

The bank expects an additional rate hike in one of its two remaining meetings this year, while it indicated fewer rate cuts next year, according to projection materials.