“What’s happening is quite worrying. Inflation figures keep coming in, new statistics from as recently as last week, and they keep surprising us. According to Kashkari, who made his remarks on CBS’s “Face The Nation,” “it’s greater than we expect.” “In addition, it’s not limited to a few broad classes. Since it is gaining traction in additional areas of the economy, the Federal Reserve is taking quick action to rein it in and bring it back down.”
Kashkari emphasized that workers endure a “real wage loss” due to rising inflation, even though earnings are increasing for many Americans. This is because the cost of goods and services is also increasing. The price of items, he claimed, was in part due to supply chain disruptions brought on by the pandemic and the current conflict in Ukraine, rather than rising wages.
“Wages are increasing for most Americans, but they are not increasing as quickly as inflation,
so real wages and real incomes are decreasing for most Americans,” he stated. “Because inflation is rising so rapidly, their wages are decreasing. The kind of wage-driven inflation where rising wages cause further price increases in a self-reinforcing cycle has not yet materialized. Wages and prices are rising to match the rising costs of living. Supply networks and the conflict in Ukraine are two of the main drivers of current high costs. Now is the time to restore equilibrium in the economy, before rising wages fuel inflation fears.”
Noting the latest findings from the economic cost index, he emphasized that higher wages were undoubtedly welcome news, but that the Federal Reserve could not sit on its hands while the supply chain realigned to bring down prices.
“Inflation, at its most fundamental, occurs when consumer demand exceeds available resources. Because of things like COVID and the ongoing conflict in Ukraine, we are aware that supplies are running scarce. The onset of supply was anticipated to be more rapid. The opposite is true, “Kashkari declared. “As a result, we need to bring down demand to strike a better balance. The Federal Reserve has a job to do, and we intend to execute it even if we don’t get any help on the supply side.”
“We just do not have time to wait for supply to recover completely. In terms of monetary policy, we must do everything we can “Moreover, he said.
According to Kashkari, the Federal Reserve will need to change monetary policy to bring down inflation because of the new plan sponsored by Senators Chuck Schumer, D-N.Y., and Joe Manchin, D-W. Va. is “not going to have much of an impact on inflation” over the next several years.
“In the short run, the negative effects on demand far outweighed the positive ones on supply. So, when I analyze a bill being debated that your two senators discussed, I don’t think it will have much of an effect on inflation over the next couple of years “His words. “Inflation projections for the foreseeable future won’t be affected in any way. I think it might have some influence in the long run, but in the short run, there’s an extreme imbalance between demand and supply, and it’s really up to the Federal Reserve to be able to bring that demand down.”
The Obama administration has been reluctant to recognize that the United States economy is in recession, and its officials have been at odds on what constitutes a recession. Kashkari made the case that inflation is so terrible on Sunday that it is irrelevant to call it a recession and that strong action is needed to solve it.
“Despite what appears to be a general weakening of GDP, the job market appears to be doing rather well. So, the economy is sending us conflicting messages. Whether or not we are technically in a recession does not alter my view that we need to keep inflation under control “What he had to say was. “As of right now, I’m obsessed with the latest inflation numbers. Currently, my attention is riveted on the salary statistics. The rate of inflation keeps beating our expectations, at least for now. The wage growth trend persists. The job market has been exceptional thus far. That implies the Federal Reserve has its own work to do regardless of whether or not we are technically in a recession.”
“Inflation of 2 percent is a far cry from where we currently stand. And there we must arrive, “Kashkari elaborated.