Kashkari Warns of 'Burst' of Inflation From Drastic Rate Cuts

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00:00If the Fed drastically lowered interest rates below where the neutral rate was,

00:04and it wasn't justified for the reasons that I just described,

00:08what we would expect to see happen is you'd expect to see the economy

00:11have a burst of high inflation.

00:13Basically, if you try to drive the economy faster than its potential to grow

00:18and its potential to produce, prices end up just going up across the economy.

00:22So we have this thing that we talk about a lot called a dual mandate.

00:25That Congress told us, Congress created the Fed, and Congress assigned us our goals.

00:30One of our goals is stable prices, 2% inflation.

00:33The other one is maximum employment.

00:35If we were to cut interest rates dramatically beyond what is justified based on the economics,

00:41you would then see probably a very low unemployment rate and very high inflation

00:46as the economy was effectively overheating.

00:49But the other thing is, you know, we are a committee.

00:52So there are 12 Federal Reserve banks.

00:54There are seven Federal Reserve governors.

00:56The Federal Open Market Committee ultimately sets interest rates.

01:00And the committee as a whole, I believe, is absolutely committed to making decisions

01:06based on data and analysis, not on political considerations.