Minneapolis Fed President Neel Kashkari, just a week after his first vote on the nation’s interest rates, published an online essay explaining it, an unusual move for a member of the central bank’s policy committee.
Kashkari wrote in the Tuesday blog that he voted with the broader panel last Wednesday to keep the federal funds rate steady, because inflation is in check and the U.S. economy is not at maximum employment.
Higher inflation and full employment are signals of an overheating economy, which the Fed panel would seek to cool by raising rates.
The Federal Reserve’s rate-setting Open Market Committee, or FOMC, in late 2015 ended seven years of near-zero interest rates with a quarter-point increase, then held off for most of last year before making another quarter-point move in December.
Kashkari, who this year gets a vote on the panel as part of a rotation with other leaders of regional Fed banks, has written several blog posts on the Medium.com website in recent months and took to the site again with the explanation of his first vote.
Kashkari wrote the essay to “enhance transparency” of the Fed “without adding to the cacophony,” a nod to the oft-followed speeches and events involving Fed officials around the country.
“Rather than predicting what will happen next, I am explaining why I voted the way I voted as a case study,” he wrote.
It wasn’t clear whether Kashkari will write an essay after every vote during his time on the FOMC. There are seven more this year. He wasn’t available for comment Tuesday, a bank spokeswoman said.
In the essay, he wrote that inflationary pressures may be building in the economy but 12-month core inflation, which excludes food and energy prices, is at 1.7 percent, below the Fed’s target of 2 percent.
“Even if it met or exceeded our target, 2.3 percent should not be any more concerning than the current reading of 1.7 percent, because our target is symmetric,” he wrote.
On jobs, Kashkari wrote that the U.S. may be close to full employment but the target may also be moving. In 2012, he noted, the Fed’s perception for full employment was an unemployment rate of 5.6 percent.
Today, the nation is at 4.8 percent but there are other indicators of some slack in jobs.
“We also know that the aggregate national averages don’t highlight the serious challenges individual communities are experiencing,” he wrote. “For example, today while the headline unemployment rate for all Americans is 4.8 percent, it is 7.7 percent for African Americans and 5.9 percent for Hispanics.”
He acknowledged that the FOMC’s statement, published with its decision after every meeting, already reveals the reasons behind it. But he said the language in those statements are a compromise among the committee’s members.
“It’s hard for compromise language to capture any individual participant’s thinking,” Kashkari wrote. “Plus, let’s be honest, the FOMC statements can be somewhat difficult for the general public to decipher.”