Further lockdown in China to contain COVID-19 leading to disruption in global supply chains – might lead to Federal Reserves to more aggressive to bring down inflation, said Minneapolis Fed President Neel Kashkari said on Tuesday.
He noted while speaking at a conference that in the best case scenario the pandemic would fade and supply chain would recover which would bring down upward pressures on prices.
Consumer prices in the U.S. rose by 8.5% in march underscoring the fastest increase since late 1981.
If that doesn’t happen, Kashkari said, “then our job will get harder … and we are going to have to do more, through our monetary policy tools, to bring inflation back down.”
Earlier last month the Fed begin its first of series of rate hike and it is widely anticipated that the Fed might be more aggressive than expected in its next month meeting.
As recently as six months ago Kashkari thought inflation would recede on its own without the Fed tightening monetary policy; he has since joined the rest of his central banking colleagues in believing the Fed does need a series of rate hikes this year to do the job.
Earlier , Federal Reserve Bank of St. Louis’s President James Bullard said the Fed needs to act quickly in raising interest rate to around 3.5% this year along with multiple half-point hikes also it shouldn’t rule out rate hike by 75 basis points.
The International Monetary Fund this week slashed its forecast for global growth in 2022 to 3.6% from an earlier estimate of 4.4%.
How the U.S. economy shapes up in the coming year will depend “on the virus, it’s going to depend on what happens in Ukraine,” said Kashkari.
“Those are giant elephants that will determine what will happen in our economy as well.”
