SCOTT SIMON, HOST:
Grocery bills are up. The cost of housing is up. Cars, gas, travel - there's no cheap way to get away. In June, the Consumer Price Index - that's a barometer for inflation - saw the largest one-month jump in 13 years. Prices are up 5.4% on average. Federal Reserve has said higher prices won't last. On Thursday, the Fed chair, Jerome Powell, told the Senate Banking, Housing and Urban Affairs Committee he and his colleagues are watching inflation closely.
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JEROME POWELL: I think we're experiencing a big uptick in inflation, bigger than many expected, bigger than - certainly than I expected. And we're trying to understand whether it's something that will pass through fairly quickly or whether, in fact, we need to act.
SIMON: One of those colleagues is Neel Kashkari. He is president and chief executive officer of the Federal Reserve Bank of Minneapolis. We spoke with him on Friday afternoon, just before the start of a so-called quiet period in advance of a meeting of the Federal Open Market Committee.
Mr. President, thanks very much for being with us.
NEEL KASHKARI: Thank you for having me. It's great to be with you.
SIMON: You oversee the 9th Federal Reserve District from Montana to the tip of Michigan. You've got some industries in that district, including timber and agriculture, that have struggled with rising prices. What have you seen?
KASHKARI: What we're seeing nationally, we're seeing here in our region as well. In many sectors, we are seeing rapidly increasing prices, whether it's manufacturing, the automotive sector, many of the service industries. Basically, what's happening is the U.S. economy went through a very abrupt shutdown a year ago. And now it's going through a reopening, and you're seeing many sectors of the economy struggle to make that adjustment. But I am in agreement with the Fed chair that we will return to a more normal pricing environment once the economy adjusts to the reopening.
SIMON: Is that the fall? Is that the winter?
KASHKARI: It's going to depend on the sector. I'll give you just a couple examples. A year ago, we couldn't get toilet paper. Now toilet paper is plentiful when you go to the grocery store. We saw lumber prices soar to record highs. Now lumber prices are returning back to more normal levels.
Some sectors are going to recover and bounce back to more normal levels more quickly. Other sectors are going to take longer. For example, the computer chips that goes in cars - it takes a long time for industry to ramp up production of those. That may take a couple years. But I'm not seeing any evidence yet that we're going to have sustained high inflation beyond this reopening period, whether that's six months or a year or 18 months. I'm not sure.
SIMON: Eighteen months of higher prices is a long time, though.
KASHKARI: It is a long time. But remember; we still have between 7 and 9 million Americans who are out of work, who we need to bring back into the job market. And so we need to be patient.
SIMON: Some economists who even worked in previous Democratic administrations have warned that all that government money pumped into the economy - and, of course, President Biden is working hard to pass a trillion dollars in infrastructure and more on climate change, education, Medicare - that all that government money pumped into the economy and low interest rates creates jobs but inexorably increases prices. And at some point, there's a trade-off. What do you believe?
KASHKARI: Well, I think at some point, there will be a trade-off. I think that's right. But it's very hard for me to understand how the economy is going to overheat, which is what these folks are basically saying, if we still have 7 to 9 million Americans who are unemployed. Those folks represent part of our economic potential. Let's see what happens and what the economy looks like once we get everybody back to work.
SIMON: Are you at all concerned with the reported rise of coronavirus infections in virtually every state - LA County's reinstated the indoor mask mandate - that if there's a widespread return to pandemic restrictions, it's going to undo some of those plans?
KASHKARI: Absolutely. And that would be a real downside risk for our economy. I mean, we're debating the outlook of inflation, but that's assuming the economy continues to have a strong recovery and a strong reopening. The delta variant could tap the brakes on that, which would really be a big setback for all of us. And so that's why I hope people across the country go out and get vaccinated. That's the best we can do to make sure our economic recovery is as strong as possible.
SIMON: Neel Kashkari heads the Federal Reserve Bank of Minneapolis.
Thanks so much for being with us, sir.
KASHKARI: Thank you for having me. Transcript provided by NPR, Copyright NPR.
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