More Fed Talk: Mester, Kashkari, Rosengren
Last Friday featured a handful of Fed speeches, and this week began the same.
Cleveland Fed President Loretta Mester warned against "moving too slow" on interest rake hikes, implicating that she would prefer that the Fed hike faster than the Fed's current "gradual" approach. Mester is not a voting member, and one of her statements was particularly interesting. She said that if the delay in rate hikes was too long, recession could loom. This is not Keynesian orthodoxy, which teaches inflation and recession are mutually exclusive. This is why, for the Keynesians, inflation is always and everywhere the remedy for recession. It is odd to hear a Fed President argue for rate hikes on the basis that not raising them will lead to recession.
Minneapolis Fed President Neel Kashkari spoke optimistically on the prospects for the blockchain. As we mentioned in a previous post, there is much incentive for central banks to adopt and monopolize blockchain technology for the sake of increased control. As the New York Times observed:
For the central banks, the promise of the technology is that it would allow them to track every pound or renminbi on every step of its travels through the financial system in real time — something that is impossible now. The goal would be to make the financial system more transparent, fast, efficient and secure.
So naturally, Kaskari sees great promise in adoption of the technology.
Finally, Boston Fed President Eric Rosengren expressed worry that the economy would overheat unless the Fed moved faster on rate hikes. If the unemployment continued to move too low, this would be a sign of overheating (per the economically fallacious Phillips Curve). That is, Rosengren seemed to argue in the opposite way of Mester, though both support hiking rates at a faster pace than current. Yet, he also expressed his belief that the Fed would someday hit a zero rate of interest and a further expanded balance sheet once again to deal with a future recession.
This gives credence to the idea that the Fed is really pushing to shrink the balance sheet and hike rates so that it can have lots of room to move when the next official recession comes. Such is the state of our "healed" economy.