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An inside look at why one Fed president voted not to raise interest rates

Thoughts from Minneapolis Fed President Neel Kashkari

Minneapolis Fed President Neel Kashkari is the only official who voted against raising the existing target range for the federal funds rate during the March meeting, as the nine other officials voted yes.  

The announcement from the Board of Governors of the Federal Reserve System raising the vote didn’t shed a lot of light on why Kashkari went against everyone else and only stated that Kashkari “preferred at this meeting to maintain the existing target range for the federal funds.”

Kashkari decided to address the move himself, explaining his reasoning in a blog post on Medium. In his words, “I am not planning to publish an update after every meeting, but given that I reached a different conclusion than my colleagues, I thought it appropriate to provide an explanation.”

He actually posted a blog on Medium after the February 2017 meeting as well, but at that time, he wasn’t alone in voting to keep rates steady.

In his blog, he cautioned that while his analysis is somewhat detailed and complex, it is still not comprehensive, as FOMC participants look at a wider range of data than what he captures in the piece.

Additionally, he stated that the views he expressed in the blog are his own and not necessarily those of the Federal Reserve System.

Check out the full Medium piece here.  

In summary, I dissented because the key data I look at to assess how close we are to meeting our dual mandate goals haven’t changed much at all since our prior meeting.

I always begin my analysis by assessing where we are in meeting the dual mandate Congress has given us: price stability and maximum employment.

Kashkari then gives an in-depth breakdown of his thoughts on price stability and maximum employment, concluding:

As was the case in the February FOMC meeting, we are still coming up somewhat short on our inflation mandate, and we may not have yet reached maximum employment. Inflation expectations remain well-anchored. Monetary policy is currently somewhat accommodative. There don’t appear to be urgent financial stability risks at the moment. There is great uncertainty about the fiscal outlook. The global environment seems to have a fairly typical level of risk. From a risk management perspective, we have stronger tools to deal with high inflation than low inflation. Looking at all this together led me to vote against a rate increase.

And Kashkari isn’t leaving the unique insights there. He posted a tweet on Monday that he will host a live Twitter Q&A on March 21.

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