After years of veiled suggestions by market skeptics that the Fed's two core mandates, inflation and employment, are just a cover for its real "third" mandate, namely supporting asset prices, today the president of the Minneapolis Fed came confirmed just that when during a meeting of the Financial Planning Association of Minnesota in Golden Valley, Minnesota, he said that “really we have a third mandate and the third mandate is financial stability.”
Kashkari also said that “at some point in probably the not too distant future” the central bank will begin to allow balance sheet to shrink via roll off although he added that “it probably won’t be as small as it was before because the U.S. economy continues to grow, but it will be smaller than it is today.”
Kashkari also said that “we are keeping our eyes open for asset prices to try to look for signs of bubbles” but admitted that it is "very hard to see asset bubbles in advance."
The regional Fed president also said that while wages have come up "they're not at alarming levels." Of course, if one looks at real, inflatiob-adjusted wages, they are actually down for the first time in years.
Preempting what are likely to be major changes in the Fed's structure under president Trump, Kashkari said that "protecting Fed independence is enormously important."
He also noted that "high student loan debt levels are a concern" and added that "we have to wait and see on new Fiscal policies."
Catch him speaking live in the livestream below.