Minneapolis Federal Reserve President Neel Kashkari said on Tuesday that the central bank has not achieved enough progress to control inflation. He believes the Fed’s benchmark rate should rise to 5.4% from its current range of 4.5%-4.7%.
“We need to raise rates aggressively,” CNBC quoted Kashkari as saying during an interview. This comes after the Labor Department reported a sharp rise in nonfarm payrolls: 517,000 in January, the highest since 1946.
Raising rates, as Kashkari said, will put a lid on inflation while allowing monetary policy to work its way through the economy. He noted that explosive jobs growth is evidence that the central bank has more work to do.
The Fed has long sought to maintain a 2% inflation rate. But, in the last year, the rate has risen to 2.5%, above the Fed’s target. To bring it back to 2%, Kashkari said that the Fed needs to raise rates more aggressively.
Kashkari also stressed the importance of relying on data to make decisions. He said that the Fed should not get too caught up in short-term economic data and must keep an eye on the longer-term trends.