Neil Kashkari, a hawkish representative within the Federal Reserve and President of the Minneapolis Federal Reserve, recently stated that he would rather excessively tighten monetary policy than do enough to take measures to lower inflation to the central bank's target of 2%.
This means that Kashkari believes that the current interest rate hike cycle is not yet over and tends to further increase interest rates in the future.
Kashkari stated in a media interview on Monday that "insufficient tightening will not allow inflation to return to 2% in a reasonable time.
Kashkari stated that the US economy has proven to be resilient. But he is worried that inflation will 'rise again'. He said that some price and wage data suggest that inflation may "stabilize above 2%, which is very worrying for me".
However, Kashkari also stated that he needs more information to make a firm judgment on the next interest rate measures.
At present, in addition to potential inflation increases, the US economy is also facing threats such as geopolitical turmoil and the possibility of the US government shutting down. In addition, the yield of long-term treasury bond rose, and borrowing became more expensive for consumers and enterprises.
It is worth noting that Kashkari has FOMC voting rights this year.
On the same day as Kashkari's aforementioned speech, former US Treasury Secretary Lawrence Summers also warned that financial markets began to believe that the Federal Reserve had won the war against inflation, and investors should remain vigilant against this heightened sentiment.
Last week, all three major US stock indices recorded five consecutive positive days, with the S&P up 5.85% and the Nasdaq up 6.61%, both achieving their largest weekly gains since mid November last year; The Dow rose 5.07%, marking its best weekly performance since late October last year.
The Federal Reserve held interest rates unchanged at last week's policy meeting, and some market participants believe that the remarks of Federal Reserve Chairman Jerome Powell may indicate that as inflation rates sharply decline from the summer of 2022, and the job market appears to be cooling, unemployment rates may slightly rise, the Federal Reserve may stop raising interest rates.
The data released by the US Bureau of Labor Statistics last Friday showed that the slowdown in non farm employment growth in the United States in October exceeded expectations, and the unemployment rate rose to a new high in nearly two years, which has slowed down compared to the hot recruitment pace this summer. This report indicates that the US labor market is slowly losing momentum, reducing the pressure on the Federal Reserve to raise interest rates.
Specifically, the total number of non farm employment in October increased by 150000, lower than the expected 180000 and far below the average monthly increase of 258000 in the past 12 months. In addition, the number of new non agricultural employment in August decreased from 227000 to 165000. The number of new non agricultural employment in September decreased from 336000 to 297000. The unemployment rate climbed to 3.9% in October, the highest level since January 2022, with a market expectation of 3.8%.