Federal Reserve Bank of Minneapolis President Neel Kashkari said January's strong labor-market report shows the U.S. central bank needs to keep raising interest rates.
"Right now I'm still at around 5.4%," Kashkari told CNBC in an interview Tuesday, referring to his forecast for how high rates need to go to bridle inflation. "If I had to pick a number today, I'd be where I was in December."
The FOMC raised its benchmark rate by a quarter percentage point to a range of 4.5% to 4.75% last week. The smaller move followed a half-point increase in December and four jumbo-sized 75 basis-point hikes prior to that.
Officials in December projected they would raise rates to 5.1% in 2023, according to their median projection, and stay on hold through the year.
"No one should overreact to one report," Kashkari said. "But the underlying strength of the services sector of the economy is still very robust and that's where I think a lot of us are focusing our attention."
Employers added 517,000 new jobs last month while the unemployment rate fell to 3.4%, the lowest since May 1969.
Kashkari, a voter this year on the policy-setting Federal Open Market Committee, has emerged in recent months as one of the more hawkish officials at the central bank as it fights high inflation.
"I too was surprised by the big jobs number. It tells me that so far we're not seeing much of an imprint of our tightening to date on the labor market," he said. "There's some evidence it's having some effect but it's pretty muted so far. I haven't seen anything yet to lower my rate path."
"We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy," he said. "We can always back off so we're having to let inflation guide policy rather than our models guide policy."
Atlanta Fed President Raphael Bostic, speaking in an interview with Bloomberg News on Monday, said the strong payroll report could suggest the need for rates to peak at higher levels and policymakers would be studying the data to see if the January numbers were an anomaly.
Investors have lifted where they see rates peaking this year and are now in line with that projection following a much stronger-than-expected January employment report.
Chair Jerome Powell, speaking to reporters on Feb. 1 after the conclusion of the Fed's meeting, said officials expect to deliver a "couple" more interest-rate increases before putting their aggressive tightening campaign on hold.
He has a chance to reinforce his message in the aftermath of the red-hot jobs print when he speaks again at 12:40 p.m. on Tuesday in Washington.
