Fed's lone dissenter Kashkari says weak inflation a concern

Bernanke

"We should have waited for more data to see if the recent drop in inflation is transitory", Kashkari said in an essay he published to explain his dissent.

"It was not clear if Kashkari was suggesting there were others besides Bullard at the Fed also advocating for a pause on interest-rate hikes, and he declined to discuss colleagues" views expressed behind closed doors. Even two-year Treasuries-the most sensitive to Fed rate hikes-saw yields fall last week. But while many of his colleagues were uncomfortable with risking a surge in inflation if the Fed failed to act, Kashkari was more anxious about the costs of excessively low inflation.

Minneapolis Fed President Neel Kashkari justified his second dissent on interest rate policy this year, saying he voted against this week's increase in borrowing costs because he doesn't think the economy is strong enough to handle it. But he said he would want to see more evidence that inflation will rise toward the Fed's 2-percent inflation goal before increasing rates again. Tighter labor markets, she said, would put that needed upward pressure on inflation.

However, Fed Chair Janet Yellen said Wednesday at a press conference that "it's important not to overreact to a few readings, and data on inflation can be noisy".

He spoke at the end of May and noted soft inflation then but said it wasn't enough to alter his forecast, which is for three hikes this year. The latest Fed staff forecast shows they expect inflation to still be below 2 percent in 2019. "My predecessor and I could not be more different", said Kashkari, who has been an aerospace engineer, a Republican candidate for California governor, and the head of the US government's bank bailout program in the financial crisis.

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