Federal Reserve bank president speaks on interest rates, state of the economy

CHIPPEWA FALLS — The U.S. economy is strong and surprisingly resilient, says Neel Kashkari, president and CEO of the Federal Reserve Bank in Minneapolis.

“One surprise to me is how resilient the U.S. economy has been. We’ve raised interest rates several times, but the economy has been able to absorb them,” Kashkari said.

Kashkari spoke before a crowd of about 130 people at the Heyde Center for the Arts in Chippewa Falls on Monday, explaining how the federal bank sets interest rates and discussing the overall state of the economy.

“We want to keep the labor market strong, but we want to get inflation back to about 2%,” he said.

Kashkari said he likes to hold these types of regional town halls to get a sense of how the economy is doing in his region. Every six weeks, he goes to Washington DC, where they discuss any possible changes to interest rates.

“Part of what I’m doing is telling them what is happening in our regional economy,” Kashkari said. “We analyze what is the U.S. potential to grow. Before our meetings, we get about 100 pages of analysis. It’s not just the U.S. economy, but what is happening around the world.”

Kashkari said that before the pandemic, interest rates had stayed low while unemployment also had stayed low. The pandemic and other factors people may not have considered, like Russia invading Ukraine, are among many causes for high inflation in recent years.

“It was not the labor market that caused inflation,” he said.

Kashkari noted that the inflation rate this year is between 2% and 3%, and their goal is to get it closer to 2%.

“It took a long longer to unwind (high inflation rates) than we expected,” he said.

The high prices are here to stay, he added.

“My brain is still wired to the prices of food from four, five years ago,” Kashkari said. “We can’t bring prices back down. To do that, you’d need an economy that is shrinking, and we don’t want that.”

Kashkari also discussed the growth of crypto currency and other e-money like Paypal and Venmo. He said he doesn’t think it is the federal bank’s role to try and create a national e-currency. He added that not many people are actually using crypto currency for purchases.

“Very few transactions are happening on crypto, except buying drugs and illegal activity,” he said.

Allyson Wisniewski, Chippewa Falls Area Chamber of Commerce president, was pleased with the turnout and having the discussion here.

“It was a fantastic opportunity for the business community to provide insight,” Wisniewski said.

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