Minneapolis Federal Reserve President Neel Kashkari said Wednesday that the U.S. labor market appears slightly improved compared to earlier this year, while the Iran war has intensified inflation that was already elevated.
Speaking at a St. Paul Area Chamber event in Minnesota, Kashkari stated the Fed's responsibility is to bring inflation back down. He emphasized the central bank must return to its 2% inflation target and should not adjust that goal.
Kashkari described a major uncertainty around how long the Strait of Hormuz will remain closed, noting this will substantially affect inflation. He said the Iran conflict has disrupted the inflation environment and that even if the Strait reopens, supply chains will take months to normalize.
Kashkari said he had confidence inflation was moving back toward 2% before the onset of the Iran conflict. He acknowledged that while inflationary shocks do not excuse the Fed from its duties, they have made controlling inflation more difficult.
The Minneapolis Fed president characterized the labor market as moving sideways and "lukewarm," though he said it appears to be holding steady.
Kashkari expressed uncertainty about whether Fed policy rate decisions will significantly impact mortgage rates. He said he was not surprised by headline inflation increases, adding that what matters is how long the strait closure persists.
Commenting on the ongoing confirmation process of Kevin Warch, President Donald Trump's nominee for Fed Chair, he described Fed's independence as foundational and said both political parties understand this principle.
Source: yahoo.finance