Fed’s Kashkari: Our job is to make sure inflation expectations don’t rise

• Our job is to make sure inflation expectations don’t rise.
• It’s a complicated thing to analyse.
• It’s hard to get a read of what’s happening underneath.
• We must ensure long-term inflation expectations don’t rise.
• I am not seeing evidence yet that long-run inflation expectations are rising.
• Investors may believe that if the trade deficit is going to come down, the US may not be as attractive an investment.
• There may be credibility to the story of investor preference shifting.
• I think we are quite a ways away from the market conditions we saw in the pandemic.
• We cannot determine where yields ultimately settle, we can only smooth the transition.
• There was a lot of good news under the hood in CPI.
• The effect of tariffs suggest inflation will be going back up again, our job is to ensure it doesn’t turn to long-term inflation.
• If we hadn’t had four years of high inflation, I’d be more comfortable taking a look-through approach.
• But with inflation still elevated, it makes me nervous about taking that one time look-through approach on tariffs effect on inflation.
• As I understand it, private credit funds are less leveraged than banks.
• Right now not seeing a systemic risk in private credit.
• It bears watching but not seeing fundamental kindling there.

There’s clearly a lot of focus on inflation expectations at the Fed. That is constraining their reaction to potential growth slowdown. That’s also why the risk of the Fed being behind the curve is very high.

This article was written by Giuseppe Dellamotta at www.forexlive.com.