The former super trader spoke up!
Minneapolis Federal Reserve Chairman Neil Kashkali suddenly stated on Tuesday local time that the strength of the real estate market has to some extent driven up inflation, which means that the Federal Reserve needs to maintain current interest rates stable for a longer period of time, even throughout the year. Kashkali was once the head of the implementation of the $700 billion (nearly 5 trillion yuan) financial rescue plan by the US Treasury Department, and was also a hawkish member of the Federal Reserve's voting committee in the past, but he did not have voting rights this year.
It is worth noting that recently, the pressure on the Federal Reserve has suddenly increased. Stanley Druckenmiller, the head of the Duquesne Family Office and billionaire investor who became famous for short selling the pound in the early 1990s, stated on Tuesday that the Federal Reserve's reckless monetary policy is harming ordinary Americans and jeopardizing President Joe Biden's chances of being re elected.
Meanwhile, a latest Gallup poll shows that due to sustained high inflation in the United States, high prices have made American consumers very dissatisfied, and they have turned their anger towards Powell. The confidence of Americans in Powell is close to historical lows, and as the chairman of the Federal Reserve, Powell's approval rating has reached its lowest level in nearly 25 years.
Nearly 5 trillion yuan trading hands release eagles
According to Reuters, on Tuesday local time, Minneapolis Federal Reserve Chairman Neil Kashkali suddenly stated that the strength of the real estate market has to some extent driven up inflation, which means that the Federal Reserve needs to maintain current interest rates stable for a longer period of time, even throughout the year. Kashkali stated at the Milken Institute meeting that it is necessary to see multiple positive inflation data indicating that the deflation process is on track in order to support interest rate cuts. He will also track the development of the labor market. He believes that a clear shift in labor market weakness may also prove that interest rate cuts are reasonable.
He stated that in March he believed the Federal Reserve needed to cut interest rates twice this year, and next month when Fed policymakers release new forecasts, he may lower the forecast to only cut rates once or even not, depending on the data.
One of the biggest factors currently driving inflation is real estate. Despite mortgage interest rates hovering around the highest level in over 20 years, supply shortages still keep house prices high. Kashkali believes that given that real estate is a key variable in monetary policy affecting the economy, its resilience raises questions about whether decision-makers and the market have misunderstood neutral interest rates, at least in the short term. He raised his long-term neutral interest rate expectation from 2% to 2.5%, and other members of the Federal Open Market Committee (FOMC) also raised this expectation. Their median forecast for the long-term federal funds rate was raised from the latest forecast released in March, which was 2.5%, to 2.6%.
According to the data, Kashkali was born into a first generation Indian immigrant family in Stowe, Ohio, USA. Before his retirement, his father Chaman was a professor of engineering at Akron City University, while his mother Hilla was a doctor. In July 2006, Kashkali bravely called Paulson to apply for a job. Paulson readily agreed and hired him as his special assistant. In 2008, Kashkali faced greater opportunities and was approved by the Senate to become the Assistant Secretary of Finance for International Economics. In 2008, the $700 billion bailout plan attracted great attention from the United States and even the world. It is reported that Kashkali actually participated in and drafted the plan, thus gaining Paulson's trust. Later, he became the head of the implementation of the $700 billion financial rescue plan by the US Treasury Department. In November 2015, he was appointed as the Chairman and CEO of the Minneapolis Federal Reserve.
Pressure from the Federal Reserve
Recently, the pressure on the Federal Reserve has also suddenly doubled.
According to Bloomberg, a new Gallup poll shows that due to persistent inflation and high prices infuriating American consumers, Jerome Powell is working hard to break free from the lowest rated Fed chairman label in nearly 25 years.
A survey shows that 39% of American adults express "great" or "considerable" confidence that the Federal Reserve Chairman will take the right action for the economy, slightly higher than the 36% seen a year ago when prices were rising. This change is within a margin of error of 4 percentage points in public opinion polls.
Powell and his central bank colleagues have been slow to respond to the surge in inflation, which reached its highest level since the early 1980s in 2022. Federal Reserve officials raised interest rates last year, causing inflation to rapidly decline but still exceeding the Fed's target, and recent data suggests that progress may have come to a halt. On the other hand, policymakers have kept borrowing costs at high levels for over 20 years, making President Joe Biden's efforts to restore economic confidence in the election year even more complex.
In fact, political factors have largely driven Powell's low approval rating. Former US President Donald Trump has hinted that Powell will use his influence to help the Democratic Party win in November. Only 30% of Republicans expressed confidence in Powell.
Powell repeatedly stated that politics and elections have no role in the decision-making of the Federal Reserve. Trump nominated Powell in 2017, and Biden reappointed Powell as Chairman of the Federal Reserve for a five-year term in 2021. Trump has stated that if elected, he will not extend Powell's term when it expires in 2026.
Meanwhile, according to Capitol Hill, public confidence in Biden's economic decisions is approaching a historic low. Confidence in Biden's economic management has decreased from 57% in 2022 to below 40% and has remained at this level ever since. His lowest point is 35% in 2023. Previously, Bush was the only president whose confidence in economic management had declined, with his approval rating dropping to 34% in 2008. At the same time, the low point for former President Obama was 42% in 2014, and the low point for former President Trump was also 42% in 2018.
Stanley Druckenmiller, the head of the Duquesne Family Office and billionaire investor who became famous for short selling the pound in the early 1990s, stated on Tuesday that the Federal Reserve's reckless monetary policy is harming ordinary Americans and jeopardizing President Joe Biden's chances of being re elected. He fiercely criticized the fiscal and monetary authorities, including Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell. He believes that Biden economics is a failure, and consumers are paying for higher inflation.
This morning, the Japanese stock market fell more than 1% again. At the same time, the US dollar index rose and the Japanese yen fell for three consecutive days, indicating that the direction of the Federal Reserve's interest rate is affecting the flow of funds in important equity markets in the Asia Pacific region. Subsequently, the Hong Kong stock market quickly rose after opening low. The Hang Seng Technology Index rose to 1% at one point, while Shangtang rose nearly 4%, leading the rise of its constituent stocks. Tencent Holdings rose nearly 2%. The Hang Seng Index rose 0.64% at one point. This may mean that the attractiveness of Hong Kong stocks still exists in the current interest rate environment.