Recession Debate Not Important... Fed Official Says "Focus on Inflation Data"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] "Whether we are in a technical recession or not, the Federal Reserve (Fed) has its duties, and the fact that we are doing our best to fulfill those duties does not change."

A Fed official pointed out that debating whether the U.S. is in a recession is not important.

Neel Kashkari, President of the Minneapolis Federal Reserve Bank, appeared on CBS's 'Face the Nation' on the 31st of last month (local time) and stated, "Whether we are in a technical recession or not, my analysis does not change." Kashkari, known as a dove within the Fed, does not have a voting right in this year's FOMC.

Kashkari explained, "I am focusing on inflation data. I am focusing on wage data," adding, "Inflation has continued to surprise us, and wages are also continuing to rise." The U.S. Consumer Price Index (CPI) inflation rate has surpassed 9%, marking the highest level in about 40 years. Additionally, the labor market remains strong, with an unemployment rate of 3.6%.

New data released last week by the Department of Labor showed that initial jobless claims reached their highest level since mid-November last year, indicating signs of cooling in the employment market. However, Kashkari assessed the labor market as "very, very strong."

Kashkari diagnosed, "Generally, recessions are characterized by high unemployment rates," and added, "We are not seeing that." He also mentioned, "I definitely want to see a slowdown (in economic growth)," and said, "It would be good if we could transition to a sustainable economy without pushing the economy into a recession." The recently released U.S. second-quarter Gross Domestic Product (GDP) recorded negative growth for two consecutive quarters, which is typically considered a technical recession.

Kashkari emphasized, "We are still far from achieving an economy where inflation returns to the 2% target," adding, "That is where we need to get to."

Furthermore, he assessed that the so-called 'Inflation Reduction Act,' which includes measures such as climate change response and raising the minimum corporate tax rate, will not have a significant impact on inflation for the next few years. He stated, "It may have some impact in the long term, but in the short term, there is a serious imbalance between supply and demand," and evaluated, "Reducing this depends on the Fed."

Regarding global supply chain disruptions, he said, "It is taking longer than expected," and added, "This means we cannot wait until supply fully recovers. We have a role to play in monetary policy."

This content was produced with the assistance of AI translation services.