Weak trend in global markets
Minneapolis Fed President Neel Kashkari’s words that interest rates could remain at the same levels for a long time limited the recent enthusiasm about Fed expectations and also suppressed risk appetite.
Following the flat closing of Wall Street Stock Exchanges on Tuesday, Asian indices are also generally weak. Japanese stocks diverged negatively from the region as Nintendo painted a weak financial outlook.
The dollar continued its rise in the third session, with the help of the stability in bond yields.
Minneapolis Fed President Neel Kashkari’s statement that the central bank is likely to keep interest rates where they are “for a long time” was a development that supported the dollar.
Yen, Bank of Japan (BOJ) Governor Kazuo Ueda said, “Exchange rates have a significant impact on the economy and inflation. Despite the statement “Depending on these movements, a monetary policy response may be required”, it lost value.
Fed can keep interest rates at the same level for a long time
Minneapolis Fed President Neel Kashkari said central bank officials are likely to keep interest rates where they are “for a long time” until they’re confident inflation is moving toward their goals.
In an article published Tuesday, Kashkari said the latest data raises questions about whether monetary policy is restrictive enough to return inflation to 2 percent. “The most likely scenario is that we sit at this level for a long time,” Kashkari said, adding, “If inflation starts to fall again or we see a significant weakening in the labor market, this could cause us to lower interest rates.”
Kashkari stated that in the opposite scenario, if inflation settles at 3 percent, interest rates may increase if necessary, but this is not the most likely scenario. Stating that the bar for increasing interest rates is very high, the Fed official noted that he did not exclude this possibility.