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  • Writer's pictureRealFacts Editorial Team

The Fed Committed to Attaining 2% Inflation

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During his interview on Bloomberg Markets: The Close, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, provided insights on current inflationary pressures. He told host Romaine Bostick, “The Fed can and will achieve 2%” inflation. This clear and concise statement underscores the Fed's absolute commitment to reaching its target inflation rate. He further stated that they are prepared to take whatever measures necessary to reach two percent, even if it entails maintaining rates at a constant level for extended periods or implementing additional rate hikes to induce disinflation. 

Bostick mentioned that many individuals globally are anchoring their cost of capital around a three percent rate, as they doubt the long-term structural feasibility of achieving 2 percent inflation. In response to this statement, Kashkari reiterated his dedication to achieving two percent inflation, stating, “I disagree with that. I mean, ultimately, the central bank—whether it's the Fed, the ECB, or the Bank of England—can determine whatever the inflation rate is. And over time, if they conduct their policy appropriately, people will come to understand that and adjust their behavior. We’re committed to 2%; we will get to 2%.” The Fed's commitment to its target rate suggests that it will not hesitate to increase rates or sustain them at higher levels if the data indicates persistent inflation. If this prolonged "higher for longer" scenario persists, it could potentially lead to adverse effects on the equities market, particularly impacting smaller-cap stocks that rely more heavily on debt financing.

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