Hawkish Fed’s Kashkari Says Treasury Market Functioning Normally Despite Yield Surge

U.S. Treasury yields have surged, but Minneapolis Fed President Neel Kashkari, one of the Federal Reserve’s most hawkish officials, said the market is functioning normally.

Appearing on CBS on August 23, Kashkari said there were “all the signs that the Treasury market is functioning normally.” Trades are taking place and market liquidity remains intact, he added.

That allows the Fed to stay focused on using the federal funds rate as its main policy tool to bring inflation back down, he said.

The 10-year Treasury yield ended at 4.73% on August 21. The 30-year yield was at 5.28%, near its highest level since 2007.

Kashkari said current Treasury yields are high compared with recent history. But he added that yields were meaningfully higher in the 1990s than they are now.

Kashkari backed a rate increase at the Federal Open Market Committee’s July meeting. He was one of three officials who dissented.

He also reiterated concern about inflation and declined to comment on the September meeting.

“We need to see more data, but I don’t want to prejudge the next meeting,” Kashkari said. “As of now, I’m not confident that inflation will return to target in the short term.”

Han Kyung-woo, Hankyung.com reporter case@hankyung.com