Fed: Neel Kashkari notes lack of progress on inflation

(Boursier.com) — Neel Kashkari, the head of the Minneapolis Fed, was very cautious during his speech today. According to him, the resilience of the real estate market raises the question of the neutral rate, while the American real estate market is in fact more resistant than in the past to a restrictive monetary policy. It is therefore possible that this resilience indicates that the neutral rate would have risen at least in the short term.

Kashkari also notes that progress on the inflation front observed during the second half of 2023 appears “to be at a standstill”. The question, he said, is whether disinflation is still ongoing and simply taking longer, or whether inflation is instead stabilizing around a higher level, perhaps 3%. In such a case, the American monetary authority would still have its work cut out for it. Kashkari also questions the restrictive nature of the policy, given the inflation data. It slightly raises its neutral rate estimate to 2.5% from 2%.