Neel Kashkari: We Shouldn't Rush to Raise Interest Rates

On Wednesday, Fed Chair Janet Yellen announced the Federal Reserve would raise its benchmark interest rate by 0.25 percentage point. Minneapolis Fed President Neel Kashkari, who voted against the rate hike, told FOX Business why he still thinks the economy is showing signs of weakness.

“I voted no only because we are coming short on both elements of our dual mandate. Inflation continues, core PCE, the inflation number we most closely watch, continues to come up short around 1.7 percent. At the same time, the job market is strong but the unemployment rate is not dropping. That’s because the labor force participation rate continues to climb,” Kashkari told FOX Businesses’ Ashley Webster.

Kashkari suggested the markets are anticipating less inflation and a lower federal funds rate than what policymakers are predicting, and he fears stocks could be in for a shock.

“I want us to get going on the balance sheet… We expanded the balance sheet with quantitative easing. What I’d like us to do next is to put out a detailed plan to the markets on exactly how and when we are going to normalize the balance sheet. Let the markets absorb that information and then as the balance sheet starts to roll off, we can return to using the federal funds rate to remove accommodation as the data supports it.”

Kashkari believes that interest rates won’t hit two percent this year, but hopes they will in 2018.