A top Federal Reserve Bank official on Sunday warned that inflation is now a larger threat than a potential recession
During an interview on CBS News’s “Face the Nation,” Neel Kaskkari, president of the Federal Reserve Bank of Minneapolis, said the Fed is determined on lowering inflation numbers.
“From my perspective, in terms of getting inflation in check, whether we are technically in a recession or not, doesn’t change my analysis,” he said. “I’m focused on the inflation data. I’m focused on the wage data. And so far, inflation continues to surprise us to the upside, wages continue to grow. So far, the labor market is very, very strong. And that means whether we are technically in a recession or not, doesn’t change the fact that the Federal Reserve has its own work to do. And we are committed to doing it.”
Kashkari noted that inflation occurs when demand outstrips supply and directed the blame at the ongoing war in Ukraine and the COVID-19 pandemic for the country’s supply chain issues.
“We hoped that supply would come online more quickly, that hasn’t happened,” he said. “So we have to get demand down into balance. I hope we get some help on the supply side.”
The Fed official also claimed that Americans are essentially getting a wage cut because inflation is outpacing wage growth.
“For most Americans, their wages are going up, but they’re not going up as fast as inflation,” Kashkari said. “So most Americans, real wages, real incomes are going down. That’s why families are finding it increasingly hard to make ends meet.”
This comes after the U.S.’s gross domestic product (GDP) fell 0.9% from April through June, a 1.6% annual drop from January through March.
Financial experts are concerned that the country may soon be in a recession but Kashkari said that the Fed is laser-focused on getting inflation down.
“We’re going to do everything we can to avoid a recession, but we are committed to bringing inflation down, and we are going to do what we need to do,” he said. “We are a long way away from achieving an economy that is back at 2% inflation. And that’s where we need to get to.”
