Fed's Kashkari Says Aggressive Rate Hikes Needed To Curb Inflation: 'Haven't Seen Anything Yet To Lower My Rate Path'

Ahead of the market open on Tuesday, a Fed official warned that the war against inflation is far from over.

What Happened: The strong January payrolls report showed that the central bank has more work to do in its fight against inflation, said Minneapolis Fed President Neel Kashkari in an interview with CNBC’s Squawk Box.

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The U.S. economy added 517,000 jobs in January and the unemployment rate edged down to a 53-year low of 3.4%, a report released by the Labor Department last week showed. Economists estimated job gains of 187,000 for the month and a jobless rate of 3.6%.

The annual rate of change in the average hourly earnings, considered an inflation measure, was 4.4%, ahead of the 4.3% increase expected by economists.

“We have a job to do. We know that raising rates can put a lid on inflation,” Kashkari reportedly said, and added, "We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy.”

Kashkari reportedly said, from the data released so far, it appears that there hasn’t been much of an imprint of the Fed tightening to date on the labor market. Although there’s some evidence that it’s having some effect, it’s pretty muted so far, he added.

“I haven’t seen anything yet to lower my rate path, but I’m obviously keeping my eyes open and we’ll see how the data comes in,” Kashkari said.

Why It’s Important: The Fed, which brought interest rates to near zero levels post the COVID-19 pandemic in early 2020, began normalizing in March 2022. A series of aggressive rate hikes have left the fed funds rate at 4.50%-4.75%, with the 25 basis point hike implemented in February.

The stock market, which languished for much of 2022 amid the Fed tightening, has begun to rally this year on hopes that the central bank will pause. The prospect of long and deep hikes could temper some of the buoyancy seen in the markets on fears that more rate hikes could push the economy into a recession.

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