Kashkari criticizes Worsh on market talks

The President of the Federal Reserve Bank of Minneapolis, Neil Kashkari, emphasized the importance of explaining the "reaction function" of the central bank's policy, which clarifies how the Fed responds to various economic developments. The goal is to help markets and the public better understand the direction of monetary policy. He called for continuing this approach, supporting a series of gradual interest rate increases to ease inflation that remains above the 2% target. Kashkari also pointed out that explaining the reaction function differs from forward guidance, which serves as a specific roadmap for policy; understanding it provides greater insight into how the central bank interprets economic developments. As part of reforms, the Federal Reserve is reviewing its communication strategies, forming working groups to study new mechanisms, with updates expected by August 2024. Despite suspending and halting forward guidance, Kashkari affirmed that the decision regarding the number of monetary policy meetings remains flexible, and the main tool to keep inflation within the target is a gradual increase in interest rates—preferring this approach over stopping or reversing rate hikes.

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