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Transcript: Neel Kashkari on "Face the Nation," November 14, 2021

Kashkari expects prices to continue "over the next few months"
Kashkari expects prices to continue rising "over the next few months" 06:24

The following is a transcript of an interview with Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, that aired Sunday, November 14, 2021, on "Face the Nation."

MARGARET BRENNAN: We turn now to Neel Kashkari, he's the president of the Federal Reserve Bank in Minneapolis and joins us from that city this morning. Good morning to you.


MARGARET BRENNAN: Neel, core inflation- inflation is at a 30 year high. Do you think we are at the peak or is it going to get worse?

KASHKARI: The math suggests we're probably going to see somewhat higher readings over the next few months before they likely start to taper off. We're seeing both a surge of demand because Congress has given a lot of money to families and businesses to get through the pandemic, but we're also seeing supply disruptions at the same time because of the COVID virus. The good news is both of those should be temporary. The challenge is these high prices that families are paying, those are real, and people are experiencing that pain right now. And so, we take that very seriously, but I'm optimistic that it should be temporary, even though it is causing pain right now.

MARGARET BRENNAN: It is causing pain, but many Americans feel like they're being told what they're experiencing isn't real when they're told it's transitory, that word the White House keeps using and the Fed keeps using. You said we won't get back to 2% inflation until 2024. Why do you think it's going to take us that long?

KASHKARI: Well, I think both of these things, the demand side and the supply side are going to take some time to work out. But it's important from the Fed's perspective that we don't set long term monetary policy and- and adjust too much based on temporary factors, even if those temporary factors take a little bit longer than we expect. You know, if you look at the supply chains, some supply chains have already sorted themselves out. Some are taking longer. We know the auto sectors and semiconductors takes a long time to put more capacity online. So, there are going to be sectors that are going to be struggling for a while- while other sectors right the ship, so to speak more quickly. And so, we need to pay very close attention to this. We need to take it very seriously. But my view is we also need to not overreact to some of these temporary factors, even though the pain is real. You know, the Federal Reserve, when we adjust monetary policy, it acts with a lag. And so, if we overreact to a short-term price increase that can set the economy back over the long term.

MARGARET BRENNAN: So, you don't think the Fed should be taking steps faster than they currently are?

KASHKARI: Right. I think we've taken the appropriate steps, as you know, we've begun normalizing our balance sheet quantitative easing. We've now began the taper process, which- which would probably take six months. That's the first step in reducing monetary policy boost that we're providing the economy. And over the next three, six, nine months, I think we're going to get a lot more data on both the demand side and the supply side to get a better reading of where the economy is headed.

MARGARET BRENNAN: You're talking about the emergency bond purchases that- that had been done throughout the course of the pandemic there and some of the emergency measures. I want to ask you about what the administration is saying it's doing and that is pumping in trillions of dollars in these rescue packages. Is the risk worth it because most economists do expect some inflation from it?

KASHKARI: Well, I think Congress and the executive branch, both President Trump and under President Biden, were very aggressive in supporting families and businesses through the pandemic, and that was the right thing to do. You know, the recovery is much stronger than it was, say, after the 2008 financial crisis. That's in part because the fiscal authorities and the monetary authorities were so aggressive. I think the question is, what does Congress and the executive branch do going forward? What they've done so far is temporary in nature. The question is, are there long-term new spending programs? And are they paid for or not? Whether or not they are paid for is going to have an impact on inflation.

MARGARET BRENNAN: Right. So, it's actually too soon to say it won't add or- or have an impact. COVID. We heard your state and your region highlighted by Dr. Gottlieb as an area where infections are climbing right now. Does this latest wave have a big impact in the recovery that you see right now underway?

KASHKARI: It absolutely will, right, right now we're about four or five million jobs and workers short of where we should be had there been no pandemic. You know, six months ago when I was on your show with you, I focused on schools that were shut, enhanced unemployment benefits and fear of the virus. While schools are largely reopened, the unemployment benefits have expired. So, what we're left with- what's keeping people on the sidelines? We think it's fear of the virus, the Delta wave and the continued spread. So, the sooner we can get this pandemic really under control, the more quickly people will have confidence to go back to work. That will help the economic recovery and that will certainly help bring down inflation.

MARGARET BRENNAN: And what about the childcare and other packages that are built into what the president is trying to push through? I know you've been looking at the impact on women dropping out of the workforce.

KASHKARI: Well, this is a long-term issue facing our country. We have been a laggard relative to other advanced economies in providing childcare for families. You and I both have young children. We know the huge challenges associated with childcare. Yet we're both very privileged to be able to afford it. Many families are not as lucky and so does have a factor. It does have an effect on women's participation in the labor force and how high our labor force participation is as a whole. These challenges have been exacerbated in the pandemic and so I think long term this is an important economic growth issue and competitiveness issue for the country.

MARGARET BRENNAN: I want to ask you, I guess it's kind of an awkward question, but you heard the Treasury Secretary seemed to indicate that Jerome Powell, the current chair of the Federal Reserve, might not have a lock on the job. Would nominating another top contender like Lael Brainard actually affect policy much?

KASHKARI: Well, I think both Chair Powell and Gov. Brainard are outstanding, very seasoned, experienced monetary policy makers, and I think if either of them got the nod from President Biden, I think we would be in very good capable hands. I have worked with both of them. I think they're both outstanding. And so, I think the president has very good choices ahead of him.

MARGARET BRENNAN: So not much of an impact on policy?

KASHKARI: I think both of them have been instrumental in the new framework that we've adopted in terms of not short cutting the recovery, and I'm confident that either of them as chair would continue to see that through. And that's very important in my view.

MARGARET BRENNAN: Understood. Neel Kashkari, thank you for your insight. We'll be right back with a lot more FACE THE NATION. Stay with us.

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