Q&A with Neel Kashkari, president of the Minneapolis Fed
Neel Kashkari has been president of the Minneapolis Federal Reserve Bank since 2016 and has become known as an outspoken monetary policymaker willing to weigh in, often via Twitter, on everything from cryptocurrencies to employment data to the Federal Reserve's ongoing rate increases — which he has repeatedly voted against.
Kashkari will be in town Monday touring Cirrus Aircraft's headquarters, followed by an invitation-only listening session with military veterans. At 5 p.m. Monday he will hold a town hall on monetary policy and the economy with area university students.
On Tuesday, Kashkari will be the keynote speaker at the Regional Economic Indicators Forum (REIF) breakfast at the DECC. Those interested in attending the event, which begins at 8 a.m., can buy tickets at nbcbanking.com/About-NBC/R-E-I-F. To watch a livestream of the student town hall or the REIF session, visit minneapolisfed.org.
Ahead of his economic temperature-taking visit, Kashkari took a few minutes to talk with the News Tribune.
Q: Tell me about your role, and the role of the Minneapolis Fed, in influencing and tracking the flow of money in our economy.
A: The Minneapolis Fed is one of 12 Reserve banks around the country. When Congress designed the Federal Reserve system they wanted to make sure that all the regions were directly represented in monetary policymaking. Part of my job is to travel around our region, which is Minnesota, North and South Dakota, Montana, the Upper Peninsula of Michigan and Northwestern Wisconsin, to understand what's happening in the local economy and bring that knowledge back to Washington, D.C. We meet eight times a year. So my role as president of the Minneapolis Fed is to lead our bank, but also be our representative on the Federal Open Market Committee. So I'm coming up to Duluth and that area just to learn firsthand how's it going in the local economy, what are businesses experiencing, what are workers experiencing, so I can bring that information back to Washington, D.C.
Q: Despite your best efforts otherwise, interest rates are going up. Can you explain why this might be a problem, for the average person and for the economy at large?
A: We use interest rates to try to balance the economy. Congress has said achieve what's called stable prices — so a growing, stable economy that's not overheating and not limping along — and also maximum employment — as many Americans who are able to work are able to find jobs. So we're trying to keep the economy from overheating but also (from) growing too slowly. I've been arguing that there still seems to be slack in the labor market, or there still seems to be Americans who would like to work who don't have jobs right now, and we're not seeing signs of wage growth or wage acceleration. And those are signs to me that the economy is not overheating. If we were to raise rates prematurely or unnecessarily, we could cool down the economy, slow it down, and make it harder for people to get raises, and make it harder for people who don't have jobs to find jobs.
Q: Every month it looks like the Duluth metro is on the edge of full employment, and every month we add jobs and more people join the labor force. How many potential workers are still on the sidelines, and how much will we need to rely on migration to fill jobs in the future?
A: We don't know for sure — this is a big question we have — how much more untapped labor is out there. Some estimates we look at think it could be more than a million Americans in the country might still be interested and available to work but who have not been able to find a job. That might be an optimistic number; it could be a million more. We know that longer-term economic growth, a big driver of it, is simply population growth. More workers, more consumers, and our national population is growing slowly because we're just not having kids at the same rate as we used to a few decades ago. So immigration has to fill in that gap. Immigration is going to be very, very important for U.S. economic growth for the long-term, and that's just a fact.
Q: Globalization has gotten a pretty bad rap lately, though we've seen it both help and hurt iron mining and manufacturing in our region. Where do you stand on the benefits and drawbacks of an integrated global economy, aka free trade?
A: Free trade is enormously important and has been for U.S. economic growth and will be going forward. We need to be able to tap into markets around the world. We need free trade — that's a two-way street, not just a one-way street. I think efforts to promote opening markets to U.S. products, to U.S. iron ore exports for example, all of those things are good and very important, that we have a free, fair-trade system around the world. But if we just erect barriers and close our borders, it may feel good for certain people in the short term — it's definitely going to hurt the U.S. economy over the long term.
Q: Jerome Powell has been Fed Chairman for about two months now. What's your assessment so far?
A: We call him Jay — I know Jay very well. We've worked together because he's been on the Board of Governors for the past five or six years, so I've had the pleasure of working with him for two years, and I think he's an outstanding monetary policymaker, I think he's an outstanding public servant, and will do a great job leading the Federal Reserve system.
Q: The American economy overall has had a pretty good, maybe not great, but pretty good stretch of growth. When should we get worried about the next recession?
A: There's nothing we see on the horizon that is causing us concerns, but these things tend to surprise us, so don't take too much comfort from that. Some of the downside risks that we see could be if we were to get in a trade war, for example — that would be very destructive for the U.S. economy and for the global economy. If there was some big global shock, a geopolitical or something happened to a big trading partner, that could have spillover back on the U.S. economy. Those are not our base-case scenarios but we always have to look out for those downside risks.
I think we're in better control (of the housing market). If you look at one of the challenges — the people getting mortgages today by and large have very good credit, so we're not running into a situation where people with no job are able to get mortgages. But maybe the pendulum has swung too far in the other direction, and we'd like to see more people with middle incomes or good but not necessarily great credit get houses. We are seeing the housing market recover but it's been a slow recovery.