Kashkari: The Federal Reserve may "moderately" cut interest rates in the coming months

According to the financial news app Zhitong Finance, Minneapolis Fed President Kashkari recently emphasized at a city hall meeting that the Federal Reserve may "moderately" cut interest rates in the coming months. However, he warned that if the labor market shows significant weakness, the Fed may reconsider the pace of its rate cuts.

Kashkari stated that the current interest rate policy has begun to have a significant tightening effect on the economy, likening it to stepping on the economic brakes. If there is unexpected weakness in the labor market in the future, he will consider accelerating the pace of rate cuts to alleviate economic pressure.

During the meeting, Kashkari admitted that the current monetary policy is mainly aimed at stabilizing inflation expectations rather than directly reducing market demand. He further explained that although inflation is gradually falling and the labor market remains strong, the situation is still complex, especially as default rates for low credit borrowers are rising. Nevertheless, overall consumer performance is still good, and wage increases for some low-income groups have reached historic highs, partially offsetting income disparities.

Regarding future monetary policy, Kashkari emphasized that the Fed will continue to closely monitor various economic data, including employment, inflation, and consumer spending, to ensure timely and accurate adjustments in the decision-making process. He pointed out that committee members will dynamically adjust their policy stance based on economic facts and their understanding of the economic situation to respond to rapidly changing economic conditions. He specifically mentioned that signs of weakness in the labor market prompted the Fed to cut rates by 50 basis points at previous meetings, and the pace of future rate cuts will depend on specific data performance.

Unexpectedly, Kashkari also mentioned that despite the tense global geopolitical situation, the oil market has not been significantly impacted, and the global energy market has remained relatively stable. This result has surprised the market and provided the Fed with more flexibility in adjusting its policies.

Looking ahead, Kashkari expressed uncertainty about the duration of the neutral interest rate. He acknowledged that it is still unclear when the Fed will end this policy cycle, and further observation is needed on the specific impact of the policy on the economy. In addition, the impact of tariff policies on inflation is also a focus of attention. Kashkari believes that tariffs may not lead to long-term inflationary pressures but rather more of a one-time adjustment in price levels, a view that has been widely accepted in the market.

Overall, Kashkari believes that the recovery of the U.S. economy faces multiple challenges, especially in balancing the decline in inflation and the weakness in the labor market. He emphasized that the Fed's ultimate goal is to avoid an economic recession, and all future policy decisions will be data-driven to ensure economic growth and stability.

Through this speech, Kashkari conveyed his cautiously optimistic outlook on the future economic prospects to the outside world, while also reminding the market that the Fed will be more flexible in formulating policies and able to respond promptly to potential economic fluctuations. This statement provides the market with more guidance on future policy paths, and investors and decision-makers have gained further policy expectations as a result