Neel Kashkari, president of the Federal Reserve Bank of Minneapolis [Reuters]
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis [Reuters]

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis and one of the Federal Reserve's most prominent hawks, said the US Treasury market is functioning normally despite a sharp recent rise in government bond yields.

Appearing on CBS's "Face the Nation" on Sunday, Kashkari said "all the signs" pointed to the Treasury market operating as it should. "Trades are happening, there's liquidity in the market," he said.

He added that those conditions allow the Fed to stay focused on using the federal funds rate as its primary policy tool to bring inflation back down.

US government bond yields have surged in recent weeks. The 10-year yield closed at 4.73 percent on Friday, while the 30-year yield stood at 5.28 percent — near its highest level since 2007.

Kashkari acknowledged that yields are elevated by recent historical standards but noted they were meaningfully higher in the 1990s than they are today.

Kashkari was one of three FOMC members who dissented in favor of a rate hike at the July Federal Open Market Committee meeting. He again voiced concern about inflation on Sunday but declined to signal his intentions for the September meeting.

"I want to see more data, but I don't want to prejudge the next meeting," he said. "At this point, I'm not confident that inflation will return to our target in the short term."


mokiya@heraldcorp.com