For Kashkari, diversity of views and voices deepens reliability of Fed's decisions

As he begins a second five-year term as president of the Federal Reserve Bank of Minneapolis, Neel Kashkari plans to continue to shake things up under both the central bank's brightest spotlight and in some overlooked corners.

Kashkari, a 47-year-old engineer who became a banker and then was brought into government, has become a distinctive figure among Fed officials as the most consistent and outspoken proponent of low interest rates — and for the way he developed his views.

In his first term, he made a point to meet with a wide variety of people, including people of color who hadn't encountered a central banker before, throughout the six states in which the regional bank operates. Even when the economy was flourishing before the pandemic, he learned many people were still looking for work. So when businesses leaders told him they couldn't find workers, he usually replied by suggesting they raise wages.

"I took a very different approach to monetary policy than basically anybody else in the Federal Reserve for the last five years," Kashkari said during an interview. "I said we're not at full employment. We shouldn't be raising interest rates. My views were shaped by the direct conversations I was having with communities around our region."

Building on that approach, Kashkari also recently committed that the Minneapolis Fed will reach out to include more diverse voices for its portion of the beige book, a product the central bank puts out eight times a year that provides anecdotes and snapshots of the economic conditions in each part of the country. It's one of many sources of information that the Fed's rate-setting committee may weigh in deciding whether to raise or lower interest rates.

"We're supposed to be assessing how the economy is doing and we're only talking to business," Kashkari said. "We're not talking to workers. It just feels like it's a very one-sided source of information."

The Minneapolis Fed's researchers have now widened their outreach for the Beige Book to include workers, employment agencies, nonprofits and minority-owned businesses. It's an idea, he added, that came out of one of the recent Racism and the Economy webinars, a series he launched with some of other regional bank presidents last year.

"In almost every dimension, this pandemic is exacerbating disparities and it's just deeply unfair," he said.

Kashkari said the new approach will be even more pronounced in the next Beige Book.

"If it works, I hope it will inspire other Federal Reserve Banks to say, 'You know what? We, too, are going to start talking to a broader range of people.' "

While there has been some progress in getting Americans back to work amid the pandemic, he told the Minnesota Senate's finance committee on Tuesday that a lot of work still remains. While the U.S. unemployment rate has fallen to 6.7%, that doesn't account for the many discouraged workers who have left the labor force. By factoring that in, he said he thinks the true unemployment rate right now is closer to 10%.

"That's still as bad as the worst labor market during the financial crisis of 2008 and 2009," he said.

"Right now, this is like a war, and I believe we have the capacity to do what we need to win the war," he said.

The last recovery, he noted, took a decade.

"We cannot have another 10-year recovery," he said. "That is far too long. The cost to society and the cost to families is far too steep." In 2017, Kashkari created a unit at the Minneapolis Fed called the Opportunity and Inclusive Growth Institute to focus on economic disparities and ways to close them.

"Obviously those disparities have been here for a long time, but it's never been more important to do that work, especially with COVID and George Floyd's murder," he said. "I just think that's a really important investment for us to make for the long term."

He also is spending time on an effort he began last year with former Minnesota Supreme Court Justice Alan Page to add an amendment to the state Constitution that would say that a quality education for all children is a civil right. "I think that's going to be very powerful for Minnesota's future," he said.

"I'm excited for the next five," he said.