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Fed's lone dissenter Kashkari says weak inflation a concern
June 16, 2017 / 3:35 PM / 6 months ago

Fed's lone dissenter Kashkari says weak inflation a concern

(Reuters) - Minneapolis Federal Reserve President Neel Kashkari said on Friday that he dissented on the U.S. central bank’s decision earlier this week to raise interest rates because of worries about a recent drop in inflation.

FILE PHOTO - Minneapolis Fed President Neel Kashkari speaks during an interview at Reuters in New York, U.S. on February 17, 2016. REUTERS/Brendan McDermid/File Photo

“We should have waited for more data to see if the recent drop in inflation is transitory,” Kashkari said in an essay he published to explain his dissent. The Fed, he said, may be “erroneously” forecasting an increase in inflation based on tight labor markets, making a mistake that could lock the U.S. economy into lower inflation for longer.

On Wednesday the Fed lifted its target for short-term borrowing costs by a quarter of a percent. Fed Chair Janet Yellen said she expects inflation, which dipped lower in recent months, to move back up toward the Fed’s 2-percent target over the medium term. Tighter labor markets, she said, would put that needed upward pressure on inflation.

Kashkari, in his essay, said that in effect he does not share that expectation.

“Unfortunately the data aren’t supporting this story,” Kashkari wrote.

Reporting by Ann Saphir; Editing by Chizu Nomiyama

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