Kashkari: Rate hike doesn't drive investment, growth

Economy | Markets 3/20/2017, 1:42 PM
Kashkari: Rate hike doesn't drive investment, growth

The share of working-age Americans who have a job has been declining for a long time and there are still many who want full-time employment, so tighter policy of the United States Federal Reserve will make the situation more difficult for them, said Neel Kashkari, president of the central bank's subsidiary in Minneapolis. Speaking to CNBC on Monday, he stressed there is "no good reason" for explaining the weakening in the segment of prime-age males.

Last week the member of the Federal Open Market Committee dissented and voted to keep rates unchanged. He underscored policymakers should explain to the public in which way higher rates of interest boost economic growth and investment. "I don't see it," Kashkari said and pointed to further labor statistics data to elaborate on his stance there is still a lot of slack.

Larger costs of borrowing aren't likely to make companies give up on stock buybacks in favor of building factories, the rate-setter underscored. He reiterated the Fed should articulate a plan to roll back easy policy and tackle the giant balance sheet in the next move.

Kashkari said income tax credit has proved to be an effective tool. He added education gaps and the direct link between unemployment and the lack of skills should be in focus of the Congress, with productivity growth and pro-investment policy measures.

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