Kashkari told CNBC that the neutral rate of interest, or one that is neither holding back the economy nor stimulating it, may have gone higher.
" when asked whether the current target range for the federal funds rate of 5.25%-5.5% is"sufficiently restrictive" to bring inflation back to the Fed's 2% goal."It's possible given the dynamics or the reopening of the economy, that the neutral rate may have moved up."
Some of his concerns stem from the fact that sectors of the economy that normally are affected by rate hikes seem to be ignoring them. "So one thing that makes me cautious that we might not be as restrictive as we think, is that consumer spending has remained robust, GDP growth continues to outperform," Kashkari said."The two sectors of the economy that are traditionally most sensitive to interest rate hikes, autos and housing, have both added some signs of bottoming and in some cases are starting to show some recovery that makes me cautious that we might not be as restrictive as we otherwise would think.
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