Fed's Kashkari sees need for new policies to boost growth

(Reuters) - Minneapolis Federal Reserve Bank President Neel Kashkari on Wednesday said he sees continued sluggish growth ahead for the U.S. economy, unless lawmakers and the president "get going" on policies to boost productivity and population.

Kashkari, who was a senior Treasury official under George W. Bush during the financial crisis, avoided direct comment on the policies or person of newly elected U.S. President Donald Trump, a Republican who campaigned on the promise of cutting taxes and lifting economic growth, or the Republican-controlled Congress.

“The Congress has said to the Fed we are going to leave you alone to set monetary policy and not interfere, and the quid pro quo is we are not going to get in their business," Kashkari told business leaders in Eau Claire, Wisconsin. "We have worked very hard to steer clear of anything in terms of partisan politics.”

Still, he said, population growth is a key driver of economic growth, and the public must therefore choose whether to accept slow growth, embark on "expensive" policies to promote a higher birthrate, or raise immigration. Trump said he would build a wall on the U.S.-Mexico border and limit immigration.

The government, Kashkari also said, could undertake policies to fund basic research, make college more affordable, and reform regulations that stifle growth to pave the way for higher productivity growth.

"If you think of where wealth comes from, it doesn't come from monetary policy," he said, "These are things that Congress and the executive branch can do."

Investors Wednesday were betting the Fed would keep to its plan of raising interest rates in December. Kashkari declined to say when he believes the Fed should next raise rates, saying he would be watching core inflation, inflation expectations, and the unemployment rate, which if it falls further would indicate that the economy is nearing full employment and doesn't need as much support from low rates.

Kashkari sidestepped a question about how Trump's policies might affect Fed decisions, saying fiscal policies are an "input" to monetary policy analysis and that he will need to "wait and see" what happens under the new president and Congress.

During his campaign, Trump said he believed the Fed was a political institution that kept rates low to benefit President Barack Obama. Kashkari did not comment on Trump's view, but acknowledged that the Fed needed to improve its image and win back the public's trust.

(Reporting by Ann Saphir; Editing by Meredith Mazzilli and Chizu Nomiyama)

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