"It could be that our monetary policy actions and the tightening of credit conditions because of this banking stress leads to an economic downturn. That might even lead to a recession," Kashkari said in a town hall at Montana State University, in answer to a student question about job prospects. But, Kashkari said, "We need to get inflation down. ... If we were to fail to do that, then your job prospects would be really hard."
Yields on long-term bonds are lower than those on
shorter-term bonds, known as the "yield-curve inversion" and
which is often a harbinger of a recession.
Kashkari said he reads the pricing in bond markets as
reflecting an expectation that inflation will fall quickly,
allowing the Fed to cut rates. But Kashkari said he is not that
optimistic, and believes inflation, now at 5% by the Fed's
preferred measure, will get to "the mid threes" by the end of
this year, still far above the Fed's 2% target.
Most Fed policymakers see inflation falling to somewhere in
the 3%-3.8% range by year-end, projections show, with the median
projection at 3.3%.
(Reporting by Ann Saphir; Editing by Christian Schmollinger and
Leslie Adler)
