Neel Kashkari, Minneapolis Federal Reserve
Brendan McDermid | Reuters
If you’re debating whether the US is in a recession, you’re asking the wrong question, according to a top Federal Reserve official.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CBS ‘Face the Nation’ on Sunday: “Whether we’re technically in a recession or not doesn’t change our analysis. I”. “I focus on inflation data. I focus on wages data. And so far, inflation continues to surprise us in the opposite direction. Wages continue to rise.”
Last month, US inflation increased record high in four decades, up 9.1% from a year ago. At the same time, the labor market remains strong: Non-farm payrolls up 372,000 last monthalong with a low national unemployment rate of 3.6%.
On Thursday, new Labor Ministry data showed signs of a slowing job market, with initial jobless claims hitting the highest level since mid-November, Kashkari said, however, the labor market “very, very strong” movement.
“Typically recessions show high job losses, high unemployment, which are terrible things for American families. And we don’t see anything like that,” he said.
The problem, says Kashkari, is that even in a strong job market, inflation is outpacing wage growth – prompting many Americans to “take a pay cut” as the cost of living rises nationally. Addressing that problem by reducing inflation is a primary goal of the Federal Reserve, he added.
“Whether we’re in a recession technically or not doesn’t change the fact that the Federal Reserve has its own job and we’re committed to it,” Kashkari said.
The Bureau of Economic Analysis reported on Thursday that the country’s gross domestic product contracted for the second quarter in a row, which is often a warning sign that accompanies economic downturns. For Kashkari, that could actually be a good thing: A recession could help bring inflation down to the point where it no longer exceeds wage growth.
“We’d definitely like to see some [of economic growth]”, he said.” We don’t want to see the economy grow too hot. We would love it if we could transition to a sustainable economy without sending the economy into recession. “
Doing so poses a significant challenge for the Fed. Kashkari acknowledged that recessions tend to be very difficult to control, “especially if the central bank itself is causing the decline.”
However, he said, the bank will do whatever it takes to curb inflation.
“We will do everything we can to avoid a recession, but we are committed to reducing inflation and we will do what needs to be done,” Kashkari said. “We’re a long way from getting an economy back to 2% inflation. And that’s where we need to be.”
