Federal Reserve (Fed) policymaker Neel Kashkari expressed his biggest fear is that the Fed and financial markets are underestimating inflationary pressures, and they need more aggressive rate hikes to address them.
If inflation remains at a higher level than expected, then the central bank will have to become more aggressive by implementing longer tightening to bring price pressure back down, Kashkari said.
Neel Kashkari who is also the most hawkish policy maker is of the view that the Fed will have to raise its interest rate by another two full percentage points by the end of next year.
In other words, the interest rate which is currently in the range of 2.25%-2.50% needs to be increased to around 4.40% in 2023.
He said, it is very clear for now that the Fed needs to tighten monetary policy.
Even so, if inflation is at 4%, the central bank may consider slowing rate hikes to ensure they don't go too far and cause the economy to go into recession.
The Fed needs to see strong evidence that consumer prices in the United States are on track to come down to the central bank's 2% target.
