Fed’s Kashkari: No urgency to change forward guidance on interest rates – Bloomberg

Minneapolis Federal Reserve (Fed) President Neel Kashkari said that there is no sense of urgency for the Fed to update its forward guidance on the interest rates to alter the market expectations, in an interview on the Bloomberg Odd Lots podcast, recorded on Aug. 26 and published Monday.

Key quotes

“Market expectations are that rates will be low for a long period of time, and so I don’t feel like there’s a burning pressure that we need to change our forward guidance today to change market expectations.” 

“I think the committee’s already done a good job setting expectations.” 

“So, I think the work will come and my guess is that we will adopt some more formal form of state-contingent forward guidance, but the committee just hasn’t gotten to that conclusion yet. But I think, I suspect that we’ll get there.”

“The minutes showed that officials discussed the possibility of new guidance using thresholds calibrated to inflation outcomes, unemployment rate outcomes, or combinations of the two.” 

“More than a year ago, I proposed that the committee adopt forward guidance that says we will not raise rates until core inflation gets back to 2% on a sustained basis.”

“I think forward guidance that is anchored to an outcome of actually achieving our inflation target would be a big step forward relative to where we are today.”

“We need to push the labor market as hard as we can until we get to our 2% inflation target, and maybe even a little bit above it if we’re making up for prior misses,”

“But I think that we have to keep our eyes on both ends of that seesaw, and that’s where just targeting, one -- black unemployment, as an example, or Hispanic unemployment -- it may not actually work to balance out both sides of our dual mandate.”

US dollar index back in the red

The bounce in the US dollar across its main competitors seems to be a dead cat one, as the losses in the US Treasury yields pressure the greenback again.

The above remarks also add to the downbeat tone around the US dollar index, which trades at 92.32, having hit a daily high of 92.47.