Fed's Highest Priority Is to Get People Back to Work: Kashkari

The Federal Reserve's "highest priority" is to make sure millions of Americans now out of a job can get back to work, Minneapolis Federal Reserve Bank President Neel Kashkari said in a speech taped Friday and released Monday.

"Putting Americans back to work...to me that's our highest priority," Kashkari said at the Community Foundations Leading Change Fall Forum, adding that "of course" the Fed will pay close attention to inflation and keep that in check. Recent high readings of inflation do not signal permanently higher inflation, he said: "We don't want to overreact to short-term price movements."

The higher prices and hiring difficulties seen as the U.S. economy reopens from the pandemic could prove "more enduring than anticipated," and the Federal Reserve would move against unchecked inflation if needed, Fed Chair Jerome Powell said in remarks prepared for delivery to the Senate Banking Committee on Tuesday.

"The process of reopening the economy is unprecedented, as was the shutdown. As reopening continues, bottlenecks, hiring difficulties, and other constraints could again prove to be greater and more enduring than anticipated, posing upside risks to inflation," Powell said in the remarks, which were released on Monday. "If sustained higher inflation were to become a serious concern, we would certainly respond and use our tools to ensure that inflation runs at levels that are consistent with our goal."

Powell's testimony also repeated key points from the Fed's policy meeting last week, including that strong economic growth is expected to continue this year even as some parts of the economy have been slowed by the surge this summer of the coronavirus Delta variant.

The Fed last week said that because of the progress of the economy it was nearing the point where it could begin to reduce its monthly bond purchases, a first stop towards returning U.S. monetary policy to a more normal footing after 18 months spent battling the impact of the coronavirus pandemic.

The hearing on Tuesday will be the banking committee's latest review of the Fed and the government's coronavirus response.

It comes at a more broadly sensitive moment for Powell, however, with President Joe Biden now mulling his possible reappointment for another four-year Fed term, and now an intensifying ethics controversy.

On Monday the presidents of two regional Federal Reserve banks announced their imminent retirements amid criticism of their active investment trading during 2020.

A key committee Democrat, Massachusetts Senator Elizabeth Warren, has been particularly critical, and called for tighter ethics rules at the Fed.