February 28, 2018 / 7:42 PM / 2 years ago

Fed's Kashkari: 'I want to see the wage growth'

FILE PHOTO: Minneapolis Fed President Neel Kashkari speaks during an interview at Reuters in New York February 17, 2016. REUTERS/Brendan McDermid/File Photo

(Reuters) - A day after Federal Reserve Chair Jerome Powell told Congress a strengthening economy boosts his confidence that inflation and wages are on the rise, one of his colleagues argued for waiting on interest-rate hikes until those increases are obvious.

“I want wage growth to continue to build, I want to see inflation move toward our 2-percent target, I want to see more evidence that the slack in the labor market is being used up: those are going to be the key factors that I pay attention to in making my recommendation,” Minneapolis Federal Reserve President Neel Kashkari said at an event on the roots of slow wage growth at the Hamilton Project in Washington.

Investors and traders are betting Powell will wrap up his first policy-making meeting as Fed chair next month with an interest-rate hike and a promise of at least two and possibly three more rate increases this year.

Kashkari’s comments Wednesday, which echo the dovish views he has expressed for more than a year, suggests Powell will face at least some opposition to further tightening begun under his predecessor Janet Yellen.

A tight labor market is encouraging employers to hire workers whom they might not otherwise have considered, including some with drug problems or criminal records, Kashakari said Wednesday. Raising interest rates could slow that process by making it more expensive for companies to operate and expand.

“We need to let the market work and allow people to find jobs and allow wages to grow,” he urged. “I think we should let the process continue.”

Reporting by Ann Saphir; Editing by Chizu Nomiyama

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