Federal Reserve's Kashkari expects moderate growth, says policy about right

Minneapolis Federal Reserve president Neel Kashkari speaking at the California Republican Party Spring Convention on March 16, 2014.
Minneapolis Federal Reserve president Neel Kashkari speaking at the California Republican Party Spring Convention on March 16, 2014.PHOTO: REUTERS

MINNEAPOLIS (REUTERS) - Minneapolis Federal Reserve president Neel Kashkari said on Monday (April 4) he is "comfortable" with the current stance of US monetary policy, and expects"moderate" economic growth ahead.

Mr Kashkari took the top job at the Fed's smallest bank in January, shortly after the Fed raised its benchmark policy rate for the first time in nearly a decade. Policymakers have left rates between 0.25 per cent and 0.5 per cent at each meeting since then.

"My view is, let's put people back to work as long as we have room on inflation," Mr Kashkari, who does not vote on monetary policy until next year, told reporters. Asked about his view on the current stance of monetary policy, he said: "I think it's about right... Right now I'm comfortable, but let's see how the economy evolves."

Mr Kashkari, who unlike many of his fellow Fed policymakers is not an economist, rarely talks about monetary policy, but the views expressed on Monday suggest he supports Fed chair Janet Yellen's patient approach to raising rates.

But he did say he found the March jobs data "compelling" in that it showed more people are returning to the workforce. "That's a good thing and we should let that process continue while inflation is running below our target," he said.

Mr Kashkari spoke to reporters at the end of an all-day symposium he had convened at his bank's Minneapolis headquarters, entitled "Ending Too Big to Fail".

It was the first of several conferences he plans this year to air and vet ways to reduce the likelihood of government bailouts of banks when the next financial crisis rolls around. He plans to release a proposal with solutions by the end of the year.

Economists and regulators from several of the Fed's 12 regional banks, as well as from the Federal Reserve Board in Washington, made the trip to attend the conference in Minneapolis.

St Louis Fed president James Bullard, who also attended the session, expressed disbelief at the "breathtaking" support among many of the session's panelists for the current state of US banking regulation.

Mr Bullard said the Fed needs conferences like Mr Kashkari's to figure out how best to keep the US financial system safe.

Among ideas mooted at Monday's conference were requiring banks to hold more capital, breaking up any bank with more than US$350 billion (S$473.5 billion) in assets, imposing fees on banks seen as risky, and changing bank governance.

The discussion was spirited, with one public spat between Professor Anat Admati of Stanford University, a critic of big banks, and former Fed governor Randy Kroszner, that continued in loud tones even after the two left the lunch session.