Minneapolis Federal Reserve Bank President Neel Kashkari, who voted against the Fed's interest-rate hikes last year, said on Monday he needs more convincing that wages and prices are on the rise before he would support further monetary policy tightening.
Wages rose faster last year in more states than in any time in the last several years, according to a recent Reuters analysis, and a government report Friday showing hourly wages rose in January at their fastest pace in more than eight years.
But to Kashkari, who is not a voter on monetary policy this year but takes part in the Fed's regular policy-setting meetings, that is not enough.
"I want to see inflation climb back to our 2-percent target, I want to see wages climb," Kashkari said in an interview on Bloomberg Television.
Signs that the economy is strengthening and inflation may be firming have driven long-run yields up, widening the gap between long- and short-run rates and steepening the yield curve.
That is good news, Kashkari said, and leaves more scope for the Fed to raise rates if needed, he added. Kashkari said he has been surprised at how much optimism his business contacts have expressed over the Trump administration's tax overhaul, but that the jury is still out on whether the tax cuts will boost growth over the long run.
And until data shows stronger inflation, he suggested, the Fed should leave rates alone.
"If we have been at 1.5 (percent inflation) for five or six years, then in theory we should let it go to 2 (percent), two and a quarter, two and a half, and shouldn't be any more concerned about that as long as we are completely committed - and we are - to keeping inflation in check over the long term," he said.
The Fed's preferred gauge for inflation rose 1.5 percent in the 12 months through December, and has missed the Fed's 2-percent target since mid-2012.
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