Fed’s Kashkari: how high rates need to go depends on supply side

Fed’s Kashkari: how high rates need to go depends on supply side

© Reuters. FILE PHOTO: President of the Federal Reserve Bank of Minneapolis Neel Kashkari speaks during an interview in New York, U.S., March 29, 2019. REUTERS/Shannon Stapleton

(Reuters) – How much higher the Federal Reserve will need to raise U.S. interest rates will depend in large part on how quickly supply chains can recover, Minneapolis Federal Reserve Bank President Neel Kashkari said on Tuesday.

Russia’s war in Ukraine and China’s COVID-19 lockdowns are tangling supply chains that at the beginning of this year were just starting to ease, Kashkari said at Lake Superior University. The Fed has indicated it will get interest rates to a neutral level – usually estimated at around 2.5% – by the end of the year; if the Fed gets help from the supply side, the Fed “won’t have to do as much” beyond that, but if not, it will need to do more, Kashkari said.

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