Kashkari explains his sole FOMC dissent

Neel Kashkari used a blog post today (March 17) to explain the reasons for his dissenting vote at this week’s Federal Open Market Committee (FOMC) meeting, stressing the need for stronger data before acting further.

The president of the Federal Reserve Bank of Minneapolis says it is important to remember that 2% inflation is a target, not a ceiling, so it should be equally concerning if inflation is above or below target. Kashkari believes the Fed risked acting too early.

“Based on our actions rather than our words, we are treating 2% as a ceiling rather than a target,” he writes. “I am not necessarily opposed to having an inflation ceiling. The European Central Bank has a 2% ceiling instead of a symmetric target. However, I am opposed to stating we have a target but then behaving as though it were a ceiling.”

Kashkari also says he thinks the Fed should begin the process of balance sheet normalisation soon. To create as little a shock as possible to markets, he recommends the FOMC publish a plan well in advance of acting.