Minneapolis Federal Reserve President Neel Kashkari, who voted against all three interest rate hikes last year due to low inflation concerns, told CNBC on Friday the January employment report is "one of the first signs" of wage growth.
"That's good for the public as a whole. I think it's good for the economy overall. But I do think if wage growth continues that could have an effect on the path of interest rates," he said on "Squawk Box" from Minneapolis. Higher rates tend to put pressure on the stock market because bond yields start to look more attractive.
The Fed is expected to hike rates three times in 2018. On Wednesday, Fed officials held rates steady after their two-day January meeting, the last one for Janet Yellen as Fed chair.
"The most important thing that I saw in a quick review of the jobs data is wage growth," Kashkari said. "We've been waiting for wage growth. Everyone's been declaring we're at maximum employment. More Americans have been coming in, which is a really good thing. But there hasn't been much wage growth. This is one of the first signs that we're seeing wage growth finally starting to pick up."
The Bureau of Labor Statistics reported earlier Friday that average hourly earnings gained 0.3 percent for the month, reflecting an annualized rise of 2.9 percent. Meanwhile, the economy added a greater-than-expected 200,000 nonfarm jobs last month. The unemployment rate was 4.1 percent.
Kashkari, who became Minneapolis Fed president in 2016, is not a voting member this year on the central bank's policymaking panel, the Federal Open Market Committee. But he was an FOMC voter last year, casting the lone dissent on rate increases in March and June. Chicago Fed President Charles Evans joined Kashkari in voting against the December rate hike.
"We've been undershooting our inflation target for basically 10 years. And there's been very muted wage growth," Kashkari told CNBC as a reason for his objections. "There [also] might be some slack still in the labor market."
Kashkari came to the Fed with experience in government and on Wall Street. He was the administrator of the Treasury Department's Troubled Asset Relief Program during the 2008 financial crisis. After leaving Washington, he joined bond giant Pimco as a managing director and head of global equities. He also unsuccessfully ran as a Republican for governor of California in 2014. Before his time at Treasury, Kashkari was a vice president at Goldman Sachs.
Kashkari also reacted to the new Republican tax law. "I've been surprised about how much optimism has come from the tax cut. And the tax cut, think of it as short term stimulus. Can it boost GDP this year? Yes. It is going to lead to a long term shift in GDP growth? It's too soon to tell."
As for all the companies who have offered onetime bonuses due to the tax changes, he said, "I think a little bit they are playing to the political moment; we're going to do out part and we're going give onetime bonuses. More compelling to me is the wage increases themselves." citing some companies that raised their minimum wages.