Minneapolis Federal Reserve President Neel Kashkari said on the 1st that further interest rate hikes may be necessary if the economy remains extremely resilient and inflation proves more stubborn than expected. In an interview with Reuters, Kashkari said he is "approaching with an open mind" how to proceed with rate increases, and that he does not "have a strong view on whether the October 27-28 meeting should decide on another rate hike." The Federal Reserve decided on a 0.25 percentage point rate increase at its September 15-16 Federal Open Market Committee meeting, and Kashkari holds a vote on the committee this year and had voted in favor of the hike. Based on economic indicators released since the September committee meeting, Kashkari said "the U.S. economy was stronger than I had expected," and noted that "the inflation rate is still too high." He also said the Federal Reserve's current policy is not significantly restraining the economy, and that "no signs of systemic risk are visible in the markets," while adding that the banking sector needs to be monitored carefully given rapid changes in borrowing costs. The final Federal Open Market Committee meeting of the year will be held on December 8-9.
Kashkari says further rate hikes may be needed if inflation stays stubborn, implying upside for the policy rate.
Hawkish Fed commentary on possible further hikes pushes the 10Y Treasury yield higher.
