(Adds comments on policy, trade war)
By Jonathan Spicer
NEW YORK, March 23 (Reuters) - One of the most dovish Federal Reserve officials said on Friday he backed this week’s decision to raise interest rates because it was well telegraphed, and while he now expects a bit more aggressive policy tightening that should depend on stronger wage growth.
“The decision this week represented continuity with what the Federal Reserve has been saying. So in that sense I supported the decision,” Minneapolis Fed President Neel Kashkari said, noting it was the first policy move under new Chair Jerome Powell.
The Fed on Wednesday raised rates a notch and published forecasts for more tightening than predicted in December. In a relatively hawkish note, it also said the economy was strengthening thanks in part to fiscal stimulus and that inflation should finally rise above a 2-percent target after years below.
Kashkari, long cautious that raising rates could cut short the economic expansion, said there is “still a ways to go” to get to full employment. “I don’t think the data itself supports rate increases at this point,” he said at a Quinnipiac forum in New York. “When I see more wage growth ... then I’ll be more supportive of rate increases.”
Perhaps surprisingly, Kashkari said he nonetheless upgraded “a little bit” his personal policy projections, known as the dots, at the Tuesday-Wednesday policy meeting. “I did bring some of my dots forward a little bit in light of the fact that there is a lot more fiscal stimulus now and a lot more spending now than we realized six months ago.”
Congress adopted some $1.8 trillion in tax cuts and government spending since December, which is expected to raise demand in the already robust economy. On the other hand, U.S. President Donald Trump on Thursday announced plans for tariffs on up to $60 billion in Chinese goods, raising the specter of a trade war and hammering financial markets.
Kashkari said the Fed cannot “shrug off” risks of a trade war, adding risks to the U.S. economy are about even right now and that Fed policy was about “neutral.” “The worst case would be a trade war that triggers a crisis of confidence in the global economy,” he said, adding he was not predicting that. (Reporting by Jonathan Spicer Editing by Chizu Nomiyama)