Federal Reserve's Kashkari: Further modest rate cuts are appropriate
Kashkari pointed out that the US labor market remains strong, with the recent employment report being encouraging, indicating that a rapid weakening of the labor market does not seem imminent. The inflation rate has fallen significantly from its peak but remains slightly above the Federal Reserve's target. Kashkari previously stated that he was satisfied with the Fed's 50 basis point rate cut in September, and that a quarter-point rate cut at each of the remaining two meetings this year would be a "reasonable starting point"
On Monday, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis and a voting member of the FOMC in 2026, stated that further moderate rate cuts by the Federal Reserve may be appropriate in the coming quarters.
Kashkari mentioned that ultimately, the future direction of Federal Reserve policy will be determined by real economic, inflation, and labor market data. While Kashkari described the current Fed policy stance as restrictive, he noted that the extent of restrictiveness is still unclear.
He pointed out that the U.S. labor market remains strong, with recent employment reports being encouraging and indicating that a rapid weakening of the labor market does not seem imminent. Additionally, Kashkari noted that the inflation rate has significantly declined from its peak but still remains slightly above the Fed's target.
Previously, Kashkari expressed satisfaction with the Fed's 50 basis point rate cut in September, stating that reducing rates by a quarter point at each of the remaining two meetings this year is a "reasonable starting point." According to the dot plot released last month, Fed policymakers expect to cut rates by a total of half a percentage point by the end of 2024.
Kashkari also mentioned that if U.S. debt continues to expand, the neutral interest rate will also rise.
The U.S. September CPI inflation index exceeded expectations, coupled with the latest data on the U.S. labor market showing a decrease in the unemployment rate against a backdrop of strong employment. These data have led investors to retract their expectations of a significant rate cut by the Fed in the near future. Currently, the bond market expects the Fed to cut rates by only 45 basis points within the year, while the options market is betting on only one more rate cut this year, possibly a 25 basis point cut, followed by a pause in rate cuts until early next year